One of the most effective ways to save money is by creating savings goals. This gives you a defined reason why you are saving for something, instead of just throwing money into a pot and pulling it out whenever you “want something.”
When you are trying to save for multiple things all from the same paycheck, you can end up allocating so much cash to your goals, you have little life over for day to day living. While it is good to have savings plans in effect, it is also very crucial that you find a balance for each of your goals. Otherwise you may end up financially strapped in one area and find you have to take from one account to make up for another deficiency, essentially destroying your entire plan.
So how can you keep things in balance? It’s not difficult but does require some forethought and continuous effort. Here are some tips for finding a balance in savings goals:
1. Make a List of Your Top Savings Goals
Start by making a list of what you want to save for and define your goals (why you want/need to save). If you are like most people, you probably have multiple areas where you want to save. These often include categories like retirement savings, an emergency fund, college savings plans, vacations, home improvements, and big ticket purchases like a new car. These can be a start to your list, depending on what your goals and needs are.
2. Prioritize Your List
Once you have established a list, you may find that you do not have enough income to sustain all of these goals – at least right now. The next step is to prioritize the categories in order of importance for you and your financial needs. Establish the priority of each item makes it easier to split your allocations accordingly and better track your progress.
3. Work These into Your Budget
Hopefully you already have an established a budget. This makes it easier to determine just how much money you have left to put towards your goals each month on a consistent basis. If you don’t already have a budget, then take the time to gather your income statements and your bills. Even if you don’t budget to the penny, this will help you have a better understanding of your net income and expenses and give you a better idea of how realistic your savings goals are, and how long it might take to achieve your financial goals.
4. Break Your Goals into Bite Size Chunks
Each goal can be broken into a small piece to make it easier to achieve. For instance, you may find it difficult to write a Kshs. 100,000 check if your goal is to purchase new furniture. But you may be able to achieve the goal in steps. Start with the Kshs. 100,000 goal, then divide by say, 6, which gives you Kshs. 16,700 per month.
It may be more difficult to establish the longer term goals such as those for retirement, since there are many unknown factors. But as time goes on and your income increases, you can gain more perspective about how much you need to save to achieve goals for the future. Short term goals may be easier to figure out. You can start with an emergency fund if you can’t afford multiple kinds of savings plans. Try to save up 6-12 months of living expenses to get going.
5. Apply These Changes to Your Budget
Your savings plan needs constant care and upgrading much like your budget. If you consistently work towards fine-tuning your goals and distributions of monies, you will likely achieve success financially with all of your goals. Goals will also change in priority depending on daily life and financial needs so keep up with your plan and keep it active.
Remember, you can get to your destination faster in your work on reducing your debt and increasing your income streams.
OK, we know that earning more money is never a bad thing, but it is sometimes easier said than done. Here are a couple ways you can earn more money. Keep in mind, they may take some time and there is work involved, but anything worth having is worth working for.
Earn more money through your day job. Chances are most, if not all, of your income comes from your day job. That means you need to work to maintain your current income, and strive to improve it if possible.
- Ask for a raise: One of the best ways to get a raise is to simply ask for it. Make sure you do it the right way and go in prepared – have a list of accomplishments including how much money you earned for the company or saved the company.
- Professional certifications: Obtaining a professional certification can lead to increased income. Research which certifications are the best in your field and go after them.
- Change job: Sometimes the best way to get a raise is to go to another company. Consider it a bonus if your company pays for it.
Earn money through alternative income streams. I define alternative income as any money earned outside your normal day job. There a hundreds of ways to earn money outside of your normal routine, and earning a little side income can help you reach your financial goals more quickly and act as an insurance policy against losing your job or another main source of income.
Is ther anything you think we missed out? Let us know the comments section!
This article was originally published in Cash Money Life.