Soooo… What are you going to do different this year, than you did last year? If you’re like the majority of people, every year you make resolutions that you never resolve, right? Join me by yelling at the top of your lungs, NOT THIS YEAR! This year will be different, this year, you will achieve your financial goals! But the question is HOW? How do you go about achieving your financial goals, this year? You start by actually setting some goals, then you write them down, then you actually revisit them daily, weekly and monthly… As we all know the age old adage, “that which gets measured, gets done."
How do you go about setting financial savings goals? I’m going to share some of the tips that I’ve personally used to set my saving goals, as well as, tips that my clients and friends have shared with me throughout the years. I’ve narrowed these down to the “Big 3” which is a theme you will find throughout all of my blogs.
- Define the Goal
- Make it Realistic
- Execute
What is your actual GOAL? And no, it can’t be “I just want to save money." How much money do you want to save, where in your budget will you cut the costs? Why do you need to save this amount of money? These are the questions you have to ask yourself. The best way to start is by taking some quiet time and sitting down with all, yes I said ALL of your year-end statements. You need to have all of your credit card statements, bank statements and any other year end statements which evidence your spending habits for the previous year. This way you can come up the best opportunities to save money. Because, if you don’t know where you’ve been, then you don’t know where you’re going (or you may end up in the same place).
Make it REALISTIC. One of the biggest pitfalls in goal setting, is planning goals that you’ll never be able to achieve. The most common new years resolutions from my clients and friends; I’m going to lose weight and/or save more money. Both which are great goals, but the question is, how much weight and how much money. This is typically where the breakdown occurs. Here are some examples: If you’ve never saved more than $1,000 a year, why is your goal $10,000. If you have a salary of $60,000 per year and your housing payment is $36,000 per year, it is probably not realistic to think you can save $20,000. You still have to eat, buy gas, pay utilities, incidentals, etc. So to keep this real simple (KISS), start by using a realistic number. Find the places you can trim your budget, limit your eating out, unnecessary cable channels, limit monthly subscriptions, cancel memberships for clubs, groups, etc if you find that you don’t use them regularly. Go to the library instead of buying books for leisure reading (how often do you actually re-read a book). Buy cheaper coffee, or better yet, learn to make coffee to your liking at home. If you don’t cook (like me) then saying you’re going to stop eating out is probably not realistic. To avoid setting yourself up for failure, design yourself a eating out budget. Try setting a per-meal price point and stick to it. Take home your left-overs. A great rule of thumb is to try and save 10% of what you bring home after all taxes and deductions, also known as your net income. But to get started work on 5%, if 10% is already a 100% increase in your normal savings plan. Heck, start with $100 a month, whatever it takes to get started.
Lastly, EXECUTE! Quit putting off until tomorrow what you can start today. Start by opening an interest bearing account specifically for your savings and I recommend that you don’t link the account to your daily account nor have an ATM card. I would even go so far as to suggest a completely different financial institution. The reason for the separation is to curb your temptations. How hard is it to lose weight if you have a refrigerator full of ice cream and cabinet full of cookies, pretty hard huh? It’s the same with your money. It’s too easy to go to the ATM machine and pull out that extra $100 from your savings when you’re going out. So don’t temp yourself. Use some forced discipline, by denying yourself easy access to your money. The harder it is to get to your money, the more time you have to think about if you really want to dip into that fund. Take baby steps, and don’t over save. Yes I said DON’T OVER SAVE! Over saving occurs when you save more money than you can afford to live without. Of course, you want to start building that nest egg, but do it realistically. The savings pot is to be treated as if it doesn’t exist. Therefore your goal is to save incremental amounts of money that will build over time and don’t touch those funds! Good Luck and Happy New You!
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