April is Financial Literacy Month—the perfect time to talk about setting savings goals—one of the first steps on the road to money sanity. Here are a few thoughts about the benefits of setting savings goals.
Watch a short clip from the Money Sanity U®® video Setting Saving Goals video.
Taking the time to outline your saving goals provides an opportunity to think about where you are and where you’d like to be. Having goals also helps you live within your means and minimize debt by being more thoughtful about how and when you spend money.
Your savings goals should be realistic, measurable, and achievable. A good rule of thumb when creating goals is think big and start small. The best savers, and the ones who achieve their saving goals, share two common traits—patience and discipline.
To get started, think about your saving goals in three separate categories:
- Short-term goals. These are things you would be saving for in 1 to 24 months, such as, a new smart phone, bike or a vacation.
- Mid-term goals. For things between 2 and 5 years, like a car, wedding or a home remodeling project.
- Long-term goals. That’s anything over 5 years, like college, a down payment for a home, or retirement.
It’s also important to include an emergency-fund for those unforeseen expenses like car or home repairs or changing jobs.
Setting goals is an important first step. To ensure that you will be successful, create a savings plan that is right for you and your current situation.
Once you have your list of goals for each time frame, prioritize them. Determine the amount of money you will need to save for each of your goals. Be sure to include any money that you have already saved toward a goal. Then, establish a target date for achieving each goal. This will help you stay focused and on task.
If you have additional funds throughout the year, such as a tax refund, overtime pay, bonuses or gifts, consider allocating some of that money to your various goals. At the end of each month, check your list and monitor your progress.
Remember: Setting and achieving savings goals is not about perfection; it’s about creating a roadmap to help you get to your final destination.