Do you set aside money each month into some type of savings account? If so, do you know what you are saving for? Maybe you think it doesn’t matter – you have a savings account, you’re putting money in it, and you’re doing your best to be financially responsible. But saving money is just like any other goal – it helps to have specific plans for your savings. Here are three reasons why you should have a specific savings goal:
If you don’t have a clear plan for your savings, what motivates you to save? Saving for the sake of saving might be enough for you to sock away your extra cash, but it’s hardly a driving force. You won’t put as much into savings as opposed to someone who has a clearly defined and aggressive goal.
However, by identifying a clear savings goal such as “I want to pay cash for a used vehicle by the end of the year”, you’ll be able to identify how much money you need to save, and how much money you need to set aside each paycheck. This forces you to step up your game.
As you diligently – and without a plan – set aside money each month, you are likely to become distracted by things that money could be spent on. Maybe you need to upgrade your car, but you keep getting lured by the sale of the latest gadget or new shoes.
Instead of your account growing steadily, maybe it’s barely staying ahead of your distractions. By having a clear goal, you’ll be able to pass up the opportunities that seem attractive, but aren’t actually your top priority.
On top of keeping you from being distracted, you will also be very clear about what you want. If you want to purchase a different vehicle, you are probably going to start thinking about what options that vehicle must have and what things you can pass on. You’ll start to price vehicles similar to what you want. Then, when your friend offers you a bargain on their used vehicle that is missing most of your criteria, you won’t be tempted.
There’s no better feeling in the world than accomplishing something that you set out to do. Say you are saving for a new home. Being able to move into that home is a great feeling, but add in your single-minded determination that allowed you to quickly save the down payment, and you’re really sure to be feeling over the moon!
A word to the wise on big, long-term savings goals: set interim milestones and celebrate those, too. It can be hard to stash away money month after month without, seemingly, getting closer to your final goal. Establish a few interim goals so that you can see if you are on track. If you are, celebrate. If not, determine how to best get back on course.
As we near the new year – a time when so many are making resolutions – it’s a good time to step back and think about what your savings goals are. What are you saving for? Do you have interim savings goals? Do you write down your financial goals?