Setting specific savings goals will save you money. Simply putting money in the bank on a regular basis can be easier for a number of reasons. You can easily transfer and spend some of the money you set aside for savers.
For these reasons, it is important to pursue a specific goal or goals. You can pursue multiple goals at once, or you can focus on a specific goal that you want to achieve.
#1 – Select a specific destination
You need to find out why you are saving money. Your savings account can be a first contribution to your household. You can save on a dream vacation or pay for another car.
You can save for retirement or an emergency fund. You can save for all these reasons.
Note: Once you know what you’re saving for, determine how much you’ll need to reach each goal.
#2 – Create a time zone to save
Once you have a savings goal and the amount you need to save, it helps to set a target date for reaching your goal. This provides additional motivation to actively pursue your savings goals.
Some time zones are simple. For example, you want to pay for a year’s vacation or a house for two years. To meet these benchmarks, you can establish guidelines and data for other purposes, such as saving for retirement or an emergency fund.
For example, you may decide that you want to receive $50,000 in retirement savings when you turn 30.
#3 – Set monthly goals
To reach your savings goal, you must decide how much you want to save each month. It should be fairly easy to achieve many of your goals, but your retirement account should be calculated based on your contributions and the returns that will increase as you grow.
A financial advisor can help you with this, as can many online calculators.
#4 – Find extra money in your monthly budget
Pool all your monthly savings into one amount. You should find that amount in your budget. You have to let this happen automatically before you have a chance to spend money on someone else.
Some companies will deposit part of your check into a savings account, or you can have the bank automatically debit your savings account each payday.
#5 – Use the right saving tool
You also need to find the right type of savings account. If you want to save for more than five years, consider mutual funds. It may also be a good idea to open a high-yield savings account to earn more interest on your savings each month.
Money market accounts through your bank or credit union often offer good returns. Certificates of Deposit (CDs) have provided good returns in the past, but you should compare them to other accounts.
Most of these options offer lower returns than other investments, such as mutual funds, exchange-traded funds, and stocks that have had higher annual returns in the past.
Warning: Please note that you do not want to put emergency money into a CD or other account that has been blocked for withdrawals. You may be penalized if you must have the money before the deadline. Savings bonds also don’t offer the opportunity to quickly reach your goals.
No matter what savings you choose, make monthly automatic transfers to make moving money easy. Make sure you have enough to cover any monthly savings so you don’t go overboard.
#6 – Reach your goals
If you have more than one goal, you have several options. You can choose to put all your money in one account and keep the book at home, no matter how much money you spend on it. Or you can choose to have separate accounts for all of your savings purposes.
For example, you can choose a savings account that is just for your emergency fund and another account that you use to save for your home or vacation.
This helps protect the money you save for these individual purposes so you don’t try to use a savings account as much of an emergency fund.
It’s always helpful to reward yourself when you’ve reached some key milestones. This can help you stay motivated to achieve big savings goals.