Like many people, saving money is probably one of your goals. But, a goal is just an idea if you don't plan out the specific steps you need to take to get there. Once you have your steps in place, taking action will get you what you aim for. Here are a few steps for simplifying your savings goals.
Simplifying Your Savings Goals Starts With Simple Steps
The first step in simplifying your savings goal is to break it down into smaller pieces. Coming up with a plan of action is easier when you have specific targets laid out. Both of the reasons for saving listed below can be met by following the same set of steps.
Simplifying Your Savings Goals Starts With Simple Steps
A common reason for saving money is to cover holiday spending. Having enough money saved for this purpose will not only help you avoid paying interest to a lender, but it will also dictate how much you can spend.
Let's say you want to have $800 saved for holiday spending. Don't wait until the end of the year to come up with that amount, as you could end up relying on credit cards or payday loans because of your lack of planning. Instead, use the example below to plug in your goals and see how much you need to save per month/paycheck/day.
Decide upon how much you want to spend this year. We'll go with $800 for this example:
- $800 over 12 months is $66.67 per month
- If you get paid twice a month, that's $33.33 per paycheck
- $800 in 365 days is $2.19 per day
Things are looking a bit clearer now, right?
$2.19 per day is more than a coffee or food you grab for breakfast or lunch.
"Planning and saving for holidays like Christmas should happen months in advance. They're not a surprise."
- Dave Ramsey
Rather than starting each year with new holiday debt to pay off, start it by setting up your new savings goal. Think about how good it will feel after the holidays, not having to pay off the debt you incurred plus interest.
Emergency Fund
You can apply these same steps to build up that vital emergency fund. The last two years have shown how crucial it is to have an emergency fund since unexpected crises can happen in the blink of an eye. Having some money set aside for emergencies can lessen the immediate impact and give you some time to set up a plan of action.
So many things can come up unexpectedly:
- Appliance breaks down and needs replacing
- Car repairs
- Medical costs
- Damage to your home (you still need to pay for your deductible)
- Legal fees
- Job loss
Having an extra $1,000 available is a good place to start. Putting that number into the steps looks like this:
- $1,000 in 12 months is $83.33 per month
- If you get paid twice a month, that's $41.67 per paycheck
- $1,000 in 365 days is $2.74 per day
In both cases, meeting your goal would cost you less than $3 a day. This smaller, specific number is easier to meet by your deadline, rather than winging it and hoping for the best.
Set up an automatic transfer of that set amount into your savings account to put your plan into action. It's important to keep that money separate from your checking account, or you run the risk of spending it.
"If you're not staying on top of your money, you're putting your financial well-being at risk."
- Suze Orman
Learn More About Simplifying Your Savings Goals
By planning ahead this way, you tell your money where to go and make it work for you, instead of your money controlling your behavior. Managing your money may seem complicated at first, but when you break it down into baby steps for one specific goal, it becomes clear and attainable.