Save For a Goal You’re Excited About: Here’s a Simple Formula
It’s important to enjoy the money you work hard for and be able to spend on the things you want. But it’s just as crucial to do it in a financially healthy way, which can also make it guilt-free and stress-free.
Your best bet for accomplishing this it to have a plan. Here are 4 steps to making a goal more do-able:
1. Decide on a heart-and-soul goal. When saving for your goal will take some willpower, it has to be something you’re excited about achieving on a deeper level. Otherwise there’s no intrinsic motivation and it’s harder to stick to. So when you name your goal, don’t make it monetary. Numbers alone don’t motivate us. Name what you want the money for. It should be something you feel emotionally connected to. For example, saying you want to save $100,000 won’t motivate you, but saying ‘I want to experience taking time off to travel the country with my family in 2018’—that’s something you can feel.
Once you have your goal in mind, figure out how much you need for it, and when you want to achieve it. For example:
|Goal||How Much Needed||# of Months to Achieve it|
|Home down-payment||$75,000||3 years from now|
|Dream vacation||$10,000||1 year from now|
|Year off to write a novel||$60,000||4 years from now|
2. Now break down the number of months (for achieving your goal) into weeks. So if you want to take a dream vacation 12 months from now, break it down to 52 weeks. Let’s say you need $10,000 in 52 weeks. Divide $10,000 by 52 and that’s the amount you’d need to save weekly. It also sounds much more do-able once it’s broken down. In this case, you’d need to earmark roughly $192 per week.
So the formula is: AMOUNT NEEDED ÷ WEEKS TO THE GOAL = WEEKLY AMOUNT TO SET ASIDE.
3. Now, of course, there needs to be money in your budget to allot. The good news is that you probably have more than you think. A family member of mine never looked at his credit card statements and was shocked to find he was spending hundreds of dollars on junk food. After that, he made more meals at home and started putting that money each month toward investing. That alone boosted his net worth significantly. I’ve heard the same from financial advisors: Clients are often surprised when the advisor breaks it down for them where their money goes each month. Most of us don’t track our spending—we kind of have a loose accounting of it in our heads, but we’re usually way off. So it’s a big surprise to find how much we’re wasting (for more on that, read my article Cash in the Trash).
Could you have a nice windfall waiting in your own pocket? Probably not quite a windfall, but it could be just the amount you need once you stop spending on the things that don’t matter to you. Take a look at your credit card statements or what you’ve bought in the past two months, along with your monthly expenses. Is there discretionary spending that you could have done without or can do without moving forward? If you think of your spending as either feeding your goals/overall well-being/happiness or starving your goals/well-being/overall happiness, you can see just what doesn’t move the meter on your long term happiness. That awareness is the beginning of getting more purposeful with your money so you get more of what you want and less of what you don’t. Which leads us to…
4. Get purposeful about what NOT to spend on also. When looking at your spending for the last two months, next to each item you bought, mark it as High ROI or Low ROI (return on investment) depending on how much it contributes to your long-term happiness/well-being/life goals. Keep those Low-ROI items in mind as your kind of ‘do not buy’ list to so you’re spending more consciously.
The bottom line is, get purposeful. Know what your goal is, how much you need for it and how much you need to put away each week. It looks and feels much more achievable when broken down. It also helps you keep your goals front and center and feels great to know you’re driving forward.
Have you found a helpful method for saving for a goal? We’d love to hear from you in the comments below.
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