We all have financial goals and saving goals. Goals may be to build savings for a house or savings for a car. It may be to be debt free, or build up an emergency fund. Or go on holiday. Or become a millionaire.
Whatever your money goals, it’s fair to say there hasn’t been much education on how to reach them.
While some people earn a salary that makes these goals more easily achievable, many have to spend years working towards them. It can seem daunting, and the path unclear. But it doesn’t have to be.
So let’s review some steps that will help you learn how to start saving money and how to build savings.
How to set savings goals
You want to be realistic about your savings goal. So be thoughtful about what you want, and how soon you want it.
Step 1: Set specific goals. Choose something you’re aiming for such as a house or car, or financial independence. Then work out how much money you need to save to achieve it.
Step 2: Create a timeline. How soon do you want to achieve this financial goal? The sooner the deadline, the more aggressively you will have to save.
How to save money for a goal
Now it’s time to turn your goal into a reality with budgeting and money management. These steps cover the financial planning for smart goals.
Step 3: Determine where the money will come from. Use a personal finance app such as the free Money Dashboard app to look at your current spending and understand where you could cut down. Calculate how much money you think you can set aside.
You also want to address the question of how much money should I save? To answer this, do some simple math to see if the total value of money you think you can save equals what you need by your deadline in step 2.
For example, if you have a goal of £10,000 savings in two years, you need to save £416 each month (£10,000 / 24 months), or £96 per week (£10,000 / 104 weeks). If you think you are able to save more, you can move up your timeline. But if you can’t, you may need to find new ways to save or move your deadline back.
Step 4: Set monthly/weekly savings aside. If you decide how much you will save and the timeline you are working towards, then congratulations, you now know how to set savings goals.
Now you can commit to that saving goal by setting money aside each week/month. If you are worried you may too easily use that money for other purposes, find a way to set aside the money into a separate, dedicated account.
Make sure you review your savings goal and savings strategy on a regular basis to make sure you’re sticking to it and adjust your behaviour accordingly.
Hold yourself accountable by tracking your saving progress each month against your savings goals. You can easily track it by adding your savings account to Money Dashboard, defining a custom goal and labelling relevant transactions.
Other words of advice
Patience is important when working towards a saving goal. In time, if you practice restraint and keep to your savings plan, you will be successful.
To help you achieve your goals ahead of schedule, consider additional things you could do to earn extra income. For example, selling unwanted items on eBay or Facebook marketplace, or starting a side hustle.
And remember, life is unpredictable. Don’t be too hard on yourself if your situation changes and you need to readjust your goals or timeline.