You have plans: things you want to do, things you want to buy, and milestones you hope to attain.
On one end of the spectrum would be next month’s rent or mortgage and groceries to pay for today. On the other hand, retirement savings may be years or even decades away. In between are some wants and needs, including homes, dining out, cars, vacations, medical expenses, and education costs.
We all have limited budgets. If you have a limited budget, you have to plan carefully to accomplish your goals. Here’s how to set and prioritize your goals.
#1. Save $500 for emergencies
Image Source: Ramseysolutions
Really, the gold standard of emergency funds is having enough money stashed away in savings to weather three to six months’ worth of expenses so a layoff or an injury won’t leave you in a hole of debt. (Keep in mind that we are talking about necessary-to-survive expenses like food and shelter.)
And yet, for many of us, conjuring up a few months’ worth of expenses just comes in at too high a bar initially. So, a good intermediate goal is to sock away $500, which at least gets you past the inevitable car repair or another big bill when it appears. We don’t want you to delay interminably making progress on the final two goals because the first savings hurdle stymies you.
Where should your emergency savings be kept? Somewhere safe (i.e., readily withdrawn or ready for money transfer in case of, you know, an emergency), safe (FDIC guaranteed), and perhaps even generate income. All of these requirements are satisfied by an online bank’s high-yield savings account.
#2. Contribute to your 401(k)
If your employer offers a retirement plan, you may be able to contribute through a 401(k) or 403(b) for nonprofit and public service employees. You should take advantage of this if your company matches some portion of your contribution. Fill out the sign-up forms available in the human resources department and put in enough money to receive all the matching funds your company offers.
The most popular employer match is 50% of contributions, up to 6% of salary. That could add up to free money worth 3% of your salary each year.
#3. Pay off high-interest-rate debt
Image Source: Credible
Trying to pay off credit card debt may seem odd in a book about investing and retirement planning. It isn’t. It’s just arithmetic.
If you carry a balance on a credit card and have a high single-digit interest rate, paying that off will save you more in interest than you stand to earn through investing.
#4. Save up for your Dream Retirement
Do you want to pack up the grandkids and go to Disney for Christmas or visit a new state each quarter with your spouse? Read every book on your shelf while lounging at home. Take up a nice pastime or go abroad to learn how to cook?
No matter what you may want for your future, it will never be achieved without good retirement investments made now. I want you to start setting aside 15% of your family income for retirement as soon as you are debt-free and have a sizeable emergency fund. And here’s the thing: when you have no debt, every dollar you save that would have gone toward payments instead goes straight into your accounts to help you save for retirement.
#5. Spend Less and Save More
Thousands of people have goals that seem to come out of thin air: “I want to spend less” or “I want to save more,” with no idea what it would mean to do such things. People, you have to be specific about your goals and intentional about your money habits.
It is a lot more about behavior than everything else, so the idea of becoming successful with money is about changing the behavior. This can be reflected in budgeting every month, seeking bargains, making use of coupons, and paying cash. Here’s a biggie: you are going to have to learn to say no to things–even yourself. I’m not saying never have fun. But if you’re going to save any money, it’s going to take some planning and a lifestyle change.
Conclusion
Financial goals will change your mindset, your habits, and ultimately your life.
This is because being intentional with every dollar you have makes money go further by giving you the ability to do more of the things that you want to do and prepare for what you’ll be doing in the future.
You’d be surprised at how much you can accomplish, but you’ll need financial goals to motivate you. Determine what you want your future to be like, and then figure out what you need to do today so that you can make that future a reality.
