Saving goals are important. It helps us reach targets that will help improve our financial situation. The truth is, if you want to set up your future so you can be financially stable, one of the habits that you need to work on is your savings.
There are so many habits that will make you a good manager of your money. Budgeting, smart spending and the smart use of credit are only a few of them. But among all these habits, it is savings that will really help you get your finances to the next level.
When you have savings, you will have the extra money to invest in financial opportunities that can come your way. Even as it grows in your savings account, your personal net worth grows with it. If you decide to invest it so it earns you money, that will help you reach financial abundance.
You can never go wrong if you start setting financial goals that will help grow your savings. Probably the worst that you can do is to spend it or stash it in an account with the lowest interest rate – both of which will not really destroy your finances. This is why it is very important that you set these saving goals so you can take the necessary steps towards wealth.
Mistakes to avoid when you are saving
Of course, we all know that saving is not that easy to commit to. Living in a consumerist society makes it even more difficult. You see, every time you put away cash into your savings account, there is this temptation to spend it. Battling these consumerist urges can be tiring.
While this arrangement certainly makes saving difficult, that does not mean it is not possible. All you have to do is to commit to the task and to make sure that you avoid these mistakes while trying to reach your saving goals.
Setting unrealistic goals.
Let us start by scrutinizing the goals that you have set up for yourself. It is great that you decided to have these goals but you have to make sure that they are realistic. If you are earning a minimum wage, aspiring for a huge house should be out of the question. Make your goals simple so you the chances of you reaching it will be bigger. Sometimes, when we set up big goals and fall short, it can be disappointing and discouraging. When that happens, we end up forgetting about the goal. According to an article published on PsychologyToday.com, the conventional thinking of people is that difficult goals can motivate people to aim high in life. But in reality, that is not true. When the consumers fail to complete a goal because it is too hard, they end up splurging more compared to not having a goal at all. So make your goals realistic so it is easier to reach. When you reach that goal, you are in a better financial position. That makes you more capable of completing a more difficult goal.
Being vague about your saving goals.
Another mistake that you can commit is to be vague about your saving goals. Just like unrealistic goals, you should also avoid being vague about it. When you set generic goals like saving for a vacation without specifying the amount or where you want to go, you will not take it seriously. Regardless if your saving goals are big or small, make it as specific as possible.
Using debt as an excuse.
Some people are sometimes forced to choose between paying off debt or saving money. The thing is, you do not have to. You should never use debt as an excuse not to save. Besides, it is not a requirement to save a big amount of money every time. You can continue to pay off your debt and save even a small amount. As your balance decreases, you can increase the savings that you will put in your account.
Failing to use a budget plan.
A budget plan is one of the tools that you can use to make your saving goals easier to reach. This plan will help you monitor the money coming in and where it goes to. When you place your saving goals in your budget plan, you can allot money to contribute towards the saving fund each month. It is actually one way to guarantee that you will make monthly contributions towards your saving goal.
Not setting a deadline.
Finally, a common mistake that people have when setting saving goals is not placing a deadline on it. This is very important because the sense of urgency will motivate you to start saving immediately. Without a deadline, you will find a lot of excuses to forego your savings. According to an article published in PsychologicalScience.org, you want to make future events that need funding seem closer and more urgent. In fact, the article revealed a research that gave importance in measuring time in days or months – instead of years. If the goal seems closer, you get to feel the urgency that will motivate you psychologically to reach your saving goals.
Important goals to save up for
Without a doubt, it is important for you to set up goals that will motivate you to save your money. If you have no idea where to start, here are important goals that you may want to work on.
Emergency fund
This fund is the cash reserve that will help you get through difficult and unexpected moments in your life. Beyond that, this is also the money that will help keep you from borrowing money. Sometimes, people make all the right choices but because they failed to save money for the rainy day, one unexpected event puts them in debt. That is sometimes how their financial troubles start.
Retirement fund
Another saving goal that you can go for is your retirement fund. Saving for retirement should really be mandatory. You owe it to yourself to make sure that your future self will have a comfortable life. This is a great way to reward yourself after working for decades to provide all the financial needs of the people relying on you.
College fund
The student loan debt is a big problem for everyone. If you can shield your children from this, that would make you a great parent in their eyes. Even the little savings can really help them in the long run. You can still encourage them to save up for their own college education but your contribution will really help a lot.
Expensive purchases
Finally, you should also think about saving for expensive purchases that you will make in the future. One thing that comes to mind is the down payment for a house. According to an article published on NYTimes.com, the 20% down payment seems like a huge task for a lot of home buyers. In fact, 65% of buyers (1.9 million borrowers) paid less than 20% on their down payment. This can cost you more in the long run because a smaller down payment will lessen the need to borrow a huge sum of money. If anything, that will increase your home equity upfront and will lower the money wasted on the interest rate. Of course, there are other expensive expenses that you need to look into like a new car, a kitchen appliance or new equipment. Make these a part of your saving goals so you do not have to apply for a loan just to fund them.
Saving is not really complicated as long as you have the determination to see it through. Here is a video testimony of how one woman saved $30,000 over 2 years. She wanted to quit the corporate world and that meant having a huge amount of savings that will support her while she set up her new life. She discussed the various sacrifices that helped her achieve her goal and the steps that she followed to reach her saving goals.
