Save Money for a Financial Goal in 5 Steps
How to Save Money for Your Financial Goals
Whether it’s the latest video games console, a luxurious holiday or even a house, everyone has different financial goals in their life.
Unfortunately, these large expenses can be very daunting to save for, especially given the impact it might have on our financial situation.
We might even resort to things such as credit cards and personal loans to help fund a financial goal in the future.
Unfortunately, this can easily spiral out of control since it’s easy to spend money that technically isn’t yours.
However, we believe that the best way to pay for a financial goal is to just save the money yourself.
While it’s perfectly fine to use your lines of credit, it’s a good idea to get into the habit of saving for a financial goal using your own money.
To get started, you’re going to need a plan and some simple steps to help you save that money.
Here are five straightforward steps to follow if you want to save for any financial goal.
Step 1: Defining your goal and breaking it down
For starters, it’s a good idea to define your goal and break it down as best as you can.
This will help you understand how much you need to save and how long you have to save for it.
For instance, if you have a holiday planned in 2 months, then you need to decide how much money you can realistically save and how much you’ll want at the end of it.
If you have goals that don’t have a set amount of money you want to save, you should still set a value to aim for.
Once you’ve defined your goal, it’s time to break it down into smaller milestones or bite-sized chunks.
For instance, if you’ve made a goal of saving $3,000 for a holiday in 3 months, then you can split that into more manageable chunks.
In this case, $3,000 in 3 months means that you’ll need to save around $1,000 every month.
Depending on the number of days in those months, you’ll need to save roughly $34 every day for 3 months to meet your goal, or roughly $250 every week.
Now that you’ve defined your goal and have broken it down, you can start to include others in your plan.
For example, if the $3,000 is a holiday for you, your partner and your two children, then it’s a good idea to speak to your family so that you can save money together.
For instance, perhaps you and your partner agree to save at least $30 each day to go towards your holiday fund.
To make up the rest, you could also encourage your children to save $4 each day by avoiding expensive snacks or making their own lunch boxes so they don’t need to pay for lunch at school.
Step 2: Identify what you can do to save towards your goal
Now that you have a goal in mind and have broken it down into smaller chunks, you can start identifying what you can do to save towards your goal.
There are countless things you can do here to save money, but the idea is to ensure that they’re practical tips that you and your family can follow without much stress.
Here are a few examples:
- Avoid buying expensive or wasteful food products such as bottled water or overpriced takeout food;
- Cancel unnecessary utilities and entertainment subscriptions that are taking money each money;
- Cut back on the amount you use your car and resort to walking or biking for shorter distances to save on gas;
- Buy one less thing for yourself each week, such as no new shirts, no new video games or no new books;
- Save by avoiding food bought at expensive stores and instead choose to go to a cheaper location for a few weeks;
- Plan your shopping in advance so that you’re less likely to impulse buy things that might go to waste;
- Cut down on in-app purchases for your favourite apps and videogames;
- Try to avoid going out with friends and family members that make you prone to spending more money, such as heading out to bars with colleagues.
These are just a couple of practical examples that can help you save money.
If you utilize a handful of these tips each day for the duration that you plan to save, you can easily save a bit of money in everything you do and eventually amass a much bigger chunk of money to spend on the things you want to.
It’s all about understanding the areas of your life that you overspend and finding cheaper alternatives or avoiding temptation.
Step 3: Find ways to increase your income
In addition to doing everything you can to save more money, there are also ways to make more money to supplement your savings.
While you don’t need to go to extremes such as getting a second job or starting a side hustle, there are a couple of ways that you can make an extra bit of cash.
Here are a few examples of areas that you can increase your income:
- Selling unwanted goods online or locally for a bit of extra cash. This can include old books, CDs, games and electronics that hold a bit of value;
- Temporarily increasing your hours or workload to earn a bit of extra cash. This can include doing an extra shift, taking on additional assignments or working on weekends;
- Using your work skills outside of the workplace to earn a bit of cash. For instance, if you work as an IT professional, you could consider offering your skills for money to people who need assistance with their computers;
- Creating a side hustle with your work skills. A great example of this is advertising your ability on websites to seek additional work or utilizing your arts and crafts skills to sell small products;
- If you have an extra car, you could consider renting it out to others. You can even rent out larger vehicles to help others move home, ferry goods around and tow other vehicles;
- If you have an extra room, you could consider renting it out for business travellers or individuals for a short time.
There are lots of other ways to make a bit of extra money.
We’ve listed some of the most straightforward ways that you can use now to earn a bit of extra cash, but you can just as well rely on long-term methods such as finding a second job or starting up a side hustle that you plan to grow for as long as possible.
Step 4: Store your money safely
The next part of saving for a financial goal is to actually have a place to store your money safely.
If you store it at home in cash form then you might be tempted to spend it on other things.
Similarly, you may accidentally end up using your savings if you store it in the same bank account that you typically use.
For smaller amounts, these two are perfectly valid options because it also helps you keep track of how much you’ve saved.
However, if it’s a long-term goal that you don’t plan to reach for several months or even years, then setting up a separate savings account might be worth the effort.
This would usually be better for something like your child’s college tuition fees or even a downpayment for a house in the future.
You’ll want to find a bank that offers a decent interest rate to account for inflation, and you should also ensure that there are minimal service fees for keeping the account open.
Now you can deposit money into this savings account or set up an automatic transfer between your regular bank account and your savings account.
Step 5: Keep track of your savings goals
Lastly, you need to have a way to keep track of your savings goals.
This is going to depend on the method you’re using to store your money.
If you’re using a savings account, then you’ll want to keep track of how much you’re depositing and then celebrate small milestones along the way.
For instance, if your goal is $5,000 then you could set milestones every $1,000 and have a small celebration with your family once you reach it.
Additionally, you could also let your friends and family know about your savings goals if they are included in the process.
Keeping everyone in the loop about your collective savings goal can help boost morale and ensure that you stick to your savings principles.
Saving money can be tricky for those that are prone to spending and temptation, but by practising a few simple tips, you’ll find that it’s not difficult as long as you set your savings goals and break it down into smaller milestones.