Financial Multi-Tasking: Achieving Multiple Savings Goals
Most of us know that multi-tasking usually isn’t an efficient way to work. But when it comes to financial planning, it actually can be. Still, the need to work toward more than one savings goal can feel overwhelming. So how can you achieve multiple savings goals?
Start with the fundamentals
Before attempting to juggle multiple savings goals, you’ll need a few fundamentals under control.
1. Start with a budget.
Whether you use an online platform like mint.com or just a plain old spreadsheet, the best budget is the one you’re going to understand and use. Figure out how much is coming in and how much is going out. Decide where you can trim, and with whatever is left, you’ll move to the next two steps.
2. Pay off your debt.
This means everything but a home mortgage loan. So if you have a few thousand on a credit card or multiple store credit cards with high-interest balances, get that cleaned up first.
3. Set aside money in an emergency savings account.
Once the high-interest debt is cleared, you can start putting away cash in case of an emergency. Consider setting up an automatic deposit into a savings account each paycheck, and start small—even $25 a week will start to build up quickly, and seeing results will help build your momentum and cement the habit. Then you’ll be freer to allocate funds to other savings goals—like college tuition, a down payment for a house, a new appliance, or a vacation.
Work toward your goals
Once you have the fundamentals taken care of, these tactics will help you set and work toward multiple savings goals.
1. Set a specific long-term goal.
For example, building an emergency fund actually is a savings goal, but how do you start? Aim for three months’ worth of living expenses. (How much will you need? That’s where your budget comes in.) If your living expenses are $4000 a month, you’ll need to save $12,000. That’s your goal.
2. Create a timeline.
Going back to your budget, find out where you can free up money for your goal. Let’s say you decide to slim down your dining out and grocery budget by $300 a month, and trim $50 in streaming video subscriptions such as Netflix. You now have $350 each month to apply to your savings goal. At that rate, you’ll reach your goal in 34 months.
3. Commit to a short-term goal.
Based on the $12,000 emergency fund goal and your timeline, you’ll need to save $350 each month. But you can break it down even further—if you were to save weekly, that would be about $87 a week to reach your $350 per month goal. Suddenly that feels doable and helps you decide to skip the expensive cab ride, or pass on the shoes on sale, or pack lunch for the week‚ and suddenly, you’re there.
4. Once you’re on your way, add an additional goal.
Now that you’re on the path to a savings goal, your savings are automated, and you’re staying on budget, it’s time to look to additional goals, such as upping your 401K contributions or setting aside cash for a home improvement project. Use the same steps, going back to your budget, finding ways to save or allocate cash, setting a long-term goal, breaking it into an attainable short-term goal, and then committing to it by making it easy and habitual.
A good financial planner can help you prioritize savings goals, find the right vehicles to make the most of your money, and get you to your goals sooner. At Aspen Wealth Strategies we help you make a customized plan that’s actionable, doable, and will set you on the road to financial success and peace of mind. Connect with an advisor today to get started.