We all have different financial goals in life. Some are short-term, while others have a longer timetable. For example, if you have young children, one of your long-term goals might be saving up enough money to fund their college educations. On the short-term side, one of your financial goals might be putting money aside for a summer vacation. The truth is, you probably have a lot of different short and long-term financial goals, and the key to achieving all of them is having a game plan.
Although your goals may be different, they should all fall under one strategy – a budget
. Think of a budget as the ultimate game plan for reaching your goals. By plotting out how much money you have coming in on a monthly basis, and how much you’re spending each month, you can get a firmer grasp on what financial goals you can realistically accomplish, and when you’re likely to achieve them.
Putting together a budget can help you identify your “needs” versus your “wants.” Essentially, your “needs” are payments you have to make each month, such as your rent or mortgage payment, utility bills, or car insurance. Your “wants” are the expenses you could essentially do without, such as the cost of going out to dinner, attending concerts, or buying a latte every day.
When you throw your financial objectives into the mix, such as saving for college or a down payment on a house, you’ll need to adjust your budget to accommodate your savings goals. So, if your goal is to stash away $200 a month toward a beach vacation, you might find that that it’s only possible to do so if you sacrifice some of your “wants”. That might mean turning the thermostat down a few degrees in the winter to save on your heating bill, canceling your cable subscription, or cooking at home instead of going out to eat.
If you’re working toward multiple goals at the same time, you may want to consider setting up separate savings accounts
for them. Having a dedicated savings account for each goal will make it easier to keep track of how close you are to reaching them. But keep in mind that a traditional savings account may not be the best way to save for every goal. It’s a good idea to evaluate your goals, and the timeframe you have to achieve them, in order to determine which savings vehicle is the right fit for each one.
For example, if you’re looking to save for retirement, your best bet might be a 401K or an Individual Retirement Account (IRA)
. If your goal is to save for your child’s education
, a 529 Savings Plan or a Coverdell Education Savings Account (CESA) might be a good fit. If you’re saving for a vacation or looking to put money away for next year’s Christmas shopping, you might consider a Club Savings Account
. There are also some Certificate of Deposit (CD) accounts, like BankFive’s 2-Year Investment CD
, that allow you to make additional deposits whenever you’d like. Interest rates on CDs are typically higher than traditional savings accounts, so they could help you to reach your savings goals faster. But since most CDs do have penalties for withdrawing money before the CD matures, it’s important to choose a term length that coincides with your savings goals.
No matter what goals you have, or which type of account you utilize to reach them, having a clear budget and game plan is a critical first step. And keep in mind that it’s always a good idea to consult a financial professional or tax advisor before making any major financial decisions. Best of luck to you on your savings journey!