I am frequently asked how to save for competing goals. This is a challenging aspect of personal finance. Often, we have multiple goals competing for our limited extra cash and all sharing the same timeline. It’s challenging, but there are tips to employ to help you reach these competing goals.
Your first step, is to know exactly how much you have to work with. This may seem obvious, but once you know the amount it’s easier to allocate and prioritize an amount of funds to each of your goals. And, to know whether you need to adjust your goals. Yep, it’s ok to adjust.
Prioritize your goals. You may have short, intermediate, and long-term goals. Break down the timeline into months and weeks. This will help you determine how much needs to be saved. For example, let’s say you have an intermediate goal to take a cruise in three years and the cruise and airfare will cost you $7,500. You can break that down to $2,500 per year, or roughly $208 per month! That’s the easy part. If you only have an extra $550 per month to save for your goals, you need to determine if this intermediate goal is achievable. Your short-term goal and your long-term goal may require more money than you have to allocate among the three goals. So, what then? This is where you prioritize. Maybe you can’t move the cruise, but maybe you can extend your long-term goal a few months or even a year. That will change the amount applied to each goal. You may need to examine if your goals are achievable as currently envisioned.
If you have sufficient cash for your competing goals, weight the amount saved by timeline and size of goal as well as by priority. You need to identify which of the three goals is the most urgent, important, and will have the most impact on your life. In our example above, you would have $342 left after targeting your intermediate term cruise goal. If that’s enough to allocate and weight for your short-term and long-term goals, great! If not, reassess.
Don’t forget the old acronym SMART. Make sure your goal is Specific, Measurable, Achievable, Relevant/Realistic, and Time-bound. Apply the SMART method to your goals for better success. Adjust when necessary. It’s ok to change course and adjust your goal and your timeline if needed. That’s using SMART.
Write down your goals and put them on a visual timeline. You can do this with pen and paper, or get fancy and use an application like Word if you want. Writing down and visualizing the goal makes it real. This physical existence can keep you focused and help you see the future of your goal.
Be sure when you are making savings goals that you haven’t forgotten to prioritize your two key savings objectives: emergency fund, and retirement. These goals do need to take priority over your other savings goals. Your emergency fund should be your first high priority savings goal.
As an independent Certified Financial Planner™, I can help you prepare a budget, investment strategy, or debt reduction plan to meet those savings goals. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #savings #debt #CFPPro #budget #budgeting #time #compounding #SMART #goal #timeline