Saving money is no easy feat. But what if you are trying to save for multiple savings goals at a time? How can you make multiple savings goals work?
While you could go ahead and try to penny-pinch your way to your goals, there are better strategies to utilize. Whether you’re looking to simply start saving or drastically increase your savings, here’s how to make multiple savings goals work.
Separate Short-Term, Mid-Term, and Long-Term Goals
First things first – it’s time to get organized.
When you think about the things you need to save for, it’s easy to fall into overwhelm. How are you supposed to balance everything? From saving for Christmas to saving for the down payment of a home, it can get complicated to prioritize everything equally.
Start beating the overwhelm by organizing your goals. Determine what your short-term savings goals are, your mid-term, and your long-term savings goals.
Since you don’t need the money for your long-term savings goals immediately, you do not need to focus as much attention on them. Your immediate goals, however, are what will require a lot of your energy and focus.
So, write down all of your savings goals, including the amount of money you need to set aside to achieve those goals. Then, determine which ones are immediate, mid-term, and long-term savings goals.
Determine How Much You Can Save
Next, look at your budget. How much money can you afford to save each month?
Separate fixed expenses, such as mortgage or rent payments, utility bills, car payments, or debt payments. These are costs that don’t change from month to month.
Once you list your fixed expenses, write down your variable expenses. These are the costs you have more control over each month. Some examples of variable expenses include groceries, clothing, social costs, or eating out.
Once you list out all of your expenses, determine how much money you have left each month. This is what you can put towards your savings goals.
If you find that you aren’t able to save as much per month as you’d like, then take another look at your expenses. Are there any you can cut out or lower to reach your savings goals sooner?
Prioritize Your Emergency Fund
Before you dive headfirst into working on your savings goals, make sure you first have a solid emergency fund.
An emergency fund is money deliberately set aside for unexpected costs, such as car repairs, medical bills, or potential job loss.
Why prioritize an emergency fund? Without one, any minor unexpected cost will derail your savings goals. You can prevent that by setting aside money into an emergency fund so you’re prepared for anything that comes your way.
Ideally, you can save 3 to 6 months of expenses in an emergency fund. However, even just $500 can provide you with the buffer you need to get started.
Automate Your Savings
Did you know you can achieve your savings goals by setting money aside automatically?
Automating your savings is an amazing way to reach your goals. With most bank accounts, you can automatically have money transferred into your savings account each month. For instance, if your goal is to save $500 a month into your emergency fund, you can set up your account to automatically transfer that money into your emergency fund.
Automating your savings not only saves you time, but it saves you from the temptation of spending that money.
Use Multiple Savings Accounts
If you have multiple savings goals, it can get messy to have all of your savings in one place.
To clearly separate your goals, consider opening separate savings account for each goal. That way, you can ensure you are on track for meeting your goals and aren’t accidentally using money that was meant for another purpose.
Another benefit of having separate savings accounts is it allows you to easily see your progress and set up automatic savings. For instance, if your goal is to save $1000 for Christmas, you can create a separate Christmas savings account. Each month, you can have a certain amount of money automatically transferred into that account. Every time you log in, you can see just how close you are to your goal.
Increase Your Income
Want to achieve your savings goals faster? Then you may want to consider increasing your income.
There are hundreds of ways to increase your income. Whether you want to look for a higher paying job or start a side business, you have plenty of options to increase your cash flow.
Even making an extra $100 a month can go a long way in achieving your goal even faster.
Track Your Progress
Lastly, commit to tracking the progress you make on your savings goals.
It’s easy to surpass this step, but it’s arguably one of the most vital ways to reach your savings goals. When you track your progress, you have a visual representation of just how far you’ve come. Instead of focusing on the fact that you haven’t yet reached your savings goals, you can now focus on the progress you’ve already made.
Track your progress in a way that inspires you. For instance, if you’re a visual person, you may want to create a graph that you can color in for every $500 you save towards your goal.
If you are a visual person, you may want to track your progress and keep it on your fridge or by your desk. The more often you see your progress, the more likely you are to make better spending decisions throughout the day.
Rachel Slifka is a freelance writer and human resources professional. She is passionate about helping fellow millennials find success with their finances and careers. Read more by checking out her website at RachelSlifka.com.