If you’re trying to save, you might be struggling with some common challenges: How do I work towards multiple financial goals at the same time? How can I make sure my financial objectives don’t get lost in day-to-day expenses or impulse buys? How can I ensure I hit my savings goal by a certain date? Let’s dig into these questions and more ways to make sure your savings goals remain a top priority. If you’d like individualized help with your savings strategy, consider working with a financial advisor.
Determine Your Personal Goals
One of the most effective ways to make saving a habit is to understand what you want to save for. Everyone has their own savings goals, but here are some of the most common and most impactful.
- Building an emergency fund: One of the best ways to feel more secure financially is to have a backup fund for unpleasant surprises. Whether it’s car trouble, an illness or something else, having a savings account that can cover these expenses can help you navigate the ups and downs of life without racking up debt or getting behind on other bills. Many experts suggest you save enough to cover about three months of expenses, but every little bit will help when the unexpected happens.
- Saving for retirement: If you’re one of the many who dream about retiring and living life on your terms, starting your retirement savings early is key. The good news is that there are retirement vehicles that offer tax savings and many employers will help you build your savings. If your employer offers a 401(k) match, take full advantage of it. Experts often advise that you save at least 15% of your pre-tax income, but again, saving a smaller percentage is better than saving nothing.
- Paying off debt: Paying off debt may not be “saving” in the traditional sense of squirrelling money away for the future, but paying off high-interest debt faster will often save you thousands of dollars over time. Once you pay off debts, you have more income that can then be directed to emergency funds, retirement accounts and more.
- Specific funds: Whether it’s a college fund, a vacation fund or a down-payment fund for a house, setting aside money for a specific purpose is an excellent goal to have.
Make a Savings Plan
So you know your goals – now how do you get there? Here are seven steps to kick off your savings journey.
- Make specific goals: Even if your financial goals don’t differ substantially from the list above, put your own unique number to it. If your monthly expenses come to $2,500 and you want an emergency fund that covers three months of expenses, you need to save $7,500. If you have two credit cards you want to pay off, each with a $500 balance, you’ll need to set aside $1,000 plus any interest payments and fees you’ll incur. If you want to save for a down payment, what price range can you afford for a home and what percentage are you hoping to put down? Get granular on the details.
- Rank your goals by priority: Which goals are the most important to you? While financial advisors will often recommend you work towards multiple financial goals at the same time—especially building an emergency fund, saving for retirement and paying off debt—you will need to determine what percentage of your income you want to direct to each fund.
- Break down your goals into monthly steps: Let’s say you’ve decided your top goals are to build an emergency fund, save for retirement and save for a down payment for a house. How much money can you devote to savings per month? If you have $500 of income that you can allocate to savings on a monthly basis, you could put $200 in your emergency fund, which means you would reach your goal of saving $7,500 in a little over three years. You could allocate another $200 to retirement savings and put the final $100 towards your down payment savings goal.
- Create a budget: You may already have a budget, but it’s time to officially add your savings goals to your spreadsheet, app or whatever you use to track your spending. By making your savings goals a part of your overall financial plan rather than something you always mean to do and never get around to, you can keep those goals high on your priority list.
- Cut spending: One of the quickest ways to accelerate your progress towards your savings goals is to cut your spending in another area and redirect that money towards savings. Are there subscriptions you don’t use? Are there services you could do yourself? Are there luxuries that you don’t enjoy enough to justify the money you spend on them?
- Automate your savings: Another way to make your savings goals a reality rather than a pipe dream is to automate them. Set up an automatic 401(k) contribution with your employer. Set up an automatic monthly transfer from your checking to your savings account. Automate your credit card payments. By taking away the opportunity for you to decide to skip it, you can solidify the habit with minimal effort.
- Use mistakes as learning opportunities: Let’s say you impulse bought a new pair of shoes with money that could have—and maybe should have—been put towards your savings goals. Rather than beat yourself up about it, ask yourself why you made that decision. Was it emotional? Did you feel peer-pressured? Did you actually get joy out of the purchase or did you just feel bad for not making a better financial decision?
Check In With an Expert
If you feel a little overwhelmed by your financial situation and haven’t been able to make headway toward your goals, you might benefit from working with a financial advisor. Experts are often able to open your eyes to things you wouldn’t otherwise have noticed and strategies you may not have otherwise tried. Financial advisors often understand the emotional side of financial decision-making as well and can help you stick with your financial priorities even when it’s tough.
It’s not just the expertise that can be valuable. Sometimes the accountability of working with a financial advisor can go a long way. If you knew someone was looking at how you spent your money and measuring it up against the goals you shared with them, would you be more likely to stick to your plan instead of splurging on something outside of the plan?
If you don’t think you can afford an advisor’s fees and you belong to an underserved group (including low-income people, military personnel, veterans and more), you may be eligible for pro bono financial planning services through the Financial Planning Association. Reach out to your local chapter to see what services they offer.
The Bottom Line
Many people have trouble prioritizing their savings goals, but you can start by fleshing out the specifics of your goals and making a plan to reach them. If you need expert help, consider working with a financial advisor, who can share new strategies and provide accountability that will help you meet your goals that much faster.
Tips for Saving Money
- Not sure what investments and strategies will help you meet your long-term goals? For a solid financial plan, consider speaking with a financial advisor who can help you think through details you may not be aware of. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s budget calculator to see how your spending breaks down and how your budget stacks up against the average person in your neighborhood.
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