Are your savings goals a lofty idea in the back of your head, or do you want to make them a reality? Before you dismiss the idea with an “I don’t think I can afford it,” let us show you how you can reach your savings goal, and how you can get the best rate of return for your money.
What Are You Saving For?
Having money in a savings account is a good thing. However, if you don’t have a specific goal in mind, you may not be as motivated as you like. A financial goal is important because it keeps us focused on the big picture. Without a big picture in mind, what is motivating you to follow through with a savings plan?
Your savings objective maybe for a new car, a down payment for a house, your children’s education, or retirement. Emergency funds are another reason to save money because, well, you just never know when you might need it. Savings accounts are much easier and cheaper than a loan.
Once you have determined your goal, then you need to see what you need to put aside each month to obtain it. This takes a long-term goal and makes it manageable. When we know our objective is achievable and we have a plan, we are more likely to follow through with it. Without a plan, it’s just a dream.
When Do You Want to Have it Saved By?
When do you want to accomplish this goal or when do you need it in place for? You also need to know exactly how much you need to save. It’s one thing to say that you need a car, but what car do you want? How much will it cost? These are all factors.
Setting the timeframe and sticking to it will help you focus and keep you on track. Yet, there will be times when things come up, you are feeling discouraged, or something else vies for your finances. Instead of being motivated to quit, find pictures to refocus you on the larger picture.
Imagine yourself on those sandy beaches, or focus on that new car smell. Imagine yourself being out of a tiny, cramped apartment and in your own spacious dwelling. Imagine how nice it is, and you will overcome feelings of de-motivation. After all, we’ve all been there!
For long-term goals such as your children’s education or retirement, you may want to establish benchmarks and dates to achieve them by. Give yourself a little slack if you fall behind, or it just doesn’t happen one month. That’s OK. However, if it happens three times, you may need some motivation.
What Are Your Monthly Objectives?
Now that you have a timeline and a total, you need to calculate how much money you need to set aside each month to obtain your goal. While for most objectives this is very straightforward, for retirement accounts, you may need to calculate your contributions and the rate of return upon maturity.
Use The Correct Savings Tools
Once you have set your objectives, look at what savings accounts are available, and what will give you the best return. For longer than five years, look at investing in mutual funds. Depending on your risk level (they will assess you for this), you can create a safe, stable portfolio that yields a reliable return like GICs, or you can diversify your portfolio to maximize your return.
What you do will depend on how involved you want to be, whether you have a trusted advisor if they are handling it, and what you are comfortable with.
You can also open a high-yield savings account. These accounts accrue a higher interest rate on your monthly savings.
Money market accounts also offer a good return, as do certificates of deposit. However, you should compare all your options as some offer a lower return over other investment options. Also, it never hurts to diversify your money if you can do so.
However, if this is an emergency fund, avoid locked accounts. You will be penalized in the event of a withdrawal prior to maturity. It also defeats the purpose of an emergency fund.
Once you have found a solution, then create automatic transfers to make things easy. This ensures that your dedicated amount will go out every month, and you won’t accidentally spend it. Just be sure to always have enough money available to cover it so you don’t go into overdraft.
Monitor Your Objectives
If you have multiple goals in mind, you may want to set up different accounts or a ledger to track your progress. Separate savings accounts tend to be much easier to maintain. It will also protect your money to ensure that you aren’t frequently tempted to tap into one of the accounts.
Also, reward yourself when you obtain your milestones! It will keep you on track and will help you to remain focused.
See If There is Extra Money for Your Goals
Maybe you have a good month and make a little extra. You can also decide to give up a regular coffee for water or juice each morning. Even small amounts quickly add up. If you can put a little extra aside each month, you will feel good about yourself, despite being grumpy about not being able to have that one cup of java each morning. It will also help you obtain your goals faster.
Saving for that dream at first may seem like a lofty ambition. Yet, when you set some time aside to examine how you can make those dreams a reality, you will discover that anything is possible.
Even if, on paper, it doesn’t look feasible, don’t despair. You can always contact your financial advisor to help you with your savings goals. That is what they are there for. Perhaps they can show you how you can decrease payments, get you a lower interest rate on your loans, or find the money somewhere to put aside.
Anything is possible.