This post is sponsored by Lexington Law. Thank you for supporting brands who support TCM. As always, all thoughts, opinions, experience, and advice is my own.
Wouldn’t it be amazing to travel to Greece? Or finally upgrade your car? Plan your dream wedding? Feel stable enough to have a baby? Or better yet, save for a home?!? Well all of those savings goals require a little bit of planning. So I'm THRILLED to announce the start of a new series here on the blog: The Money Saving Series! Over the next few months, I'll be breaking down the ins-and-outs of saving to reach your goals for every one of life's milestones.
Today we are going to start with some foundational tips. In this post on how to reach any savings goal, you'll learn a quick and easy formula that you can apply anytime, anywhere. The follow up posts in the savings series will give you some milestone specific tips, so make sure to check back every other week as I spill the beans on saving for everything from bucket list travels, to babies, to each of the major holidays so you can stop stressing and overspending and start living your best life; or better yet, subscribe here so you get the latest posts delivered to your inbox weekly and I'll send you some bonus tips for saving on a tight budget:
How To Reach Any Savings Goal
Step 1: Determine how much you’ll need.
Figure out how much you’re going to need to make your goal a reality. Maybe it’s $6,000 for a car or $100,000 for a downpayment on a home. Try to use this time to factor in an unexpected hidden costs you’ll have to pay. For instance, if you’re goal is to go on a vacation, and the room coss $200 a night, are there hidden fees like a required resort fee or valet fee and resort or additional taxes? Again, I'll be going into more details of those hidden fees for each milestone over the coming months in this savings series, so make sure you subscribed above so you never miss a post!
Step 2: Get your finances in order
Before embarking on your savings goal journey you'll want to get your finances in order. Make sure you have an emergency fund in place (you won't want to lose steam and start from square one if an emergency pops up). You'll also want to look at getting your credit score in good standing. A good credit score will make reaching most savings goals immensely easier. For instance, if you are looking to buy a house, a good credit score can help in the mortgage process. Or if you looking to plan your dream wedding or bucket list travel, a good credit score can allow you to get the best rewards credit cards and thereby helping you along to your savings goal! The credit score is not a precursor, you can do it alongside the rest since both saving for your goal and repairing your credit can take time. Reach out to the professionals at Lexington Law firm for your free credit repair consultation here. They help their clients remove unfair, inaccurate, and unsubstantiated credit report items.
Step 3: Deduct any money already set aside from the goal.
Perhaps you already saved up $500 for a new car or your family put aside $10,000 towards a downpayment on a home. Go ahead and subtract any money that’s already secured and set aside from your total amount. NOTE: this is NOT money you have tucked away in your emergency fund. This is money that's actually earmarked for your savings goal.
Step 4: Determine when you want to make your goal a reality.
Perhaps you want to get a new car in 6 months or buy a home in 3 years. You’ll want to take that total number from step one and divide it by your time frame in months.
Example: $6,000 for the new car, with no money set aside, over 6 months equals $1,000 per month you’ll want to put aside.
Home example: $40,000 for a new home, minus $7,600 from family, divide by 36 months equals $900 a month you’ll want to set aside as a fixed amount in your budget; if it seems unrealistic like an unrealistic number, consider either elongating your timeline, increasing your income, or cheaper alternatives.
Step 5: Factor your fixed monthly amount into your budget
Using the information gained from above, go ahead and add this new number as a fixed expense. If you're using the 50/20/30 guideline, it'll be a part of that “20” number. Another great money move to reach your savings goal: see if your employer will allow you to divert your monthly amount from your paycheck directly into a savings account. This way the money never hits your checking, so you aren't tempted by it. Sort of an “out of sight, out of mind right,” protection.
Bonus Savings Steps:
Step 6: Choose the right savings tools
Putting your money into a high yield savings account is a great first step. However, if you have a longer term saving goal you're working towards – like buying a house in three years – consider looking into other savings tools like money market accounts or CDs if it matches your timeline and will give you a higher return than your savings account. Ideally look for something that has a fixed timeline and return rate – you don't want to go putting your money into the stock market only for it to crash when you want to buy the house.
Aside from formal tools, choices you make in your daily life can net you massive annual savings. Lexington Law put together this great infographic for “greener” options you can swap out in your household, including the annual savings from the swaps!
[RELATED] How To Be Wealthy In Your 20s or 30s
Step 7: Find ways to stay connected to your “why”
Motivation has a half life. If you're saving for something that's more than six months out, it can be easy to forget what you're saving for and fall off track with your goals. Find a way to revisit your “why” in what you're saving towards regularly to keep your motivation levels high.
For instance, my husband and I were saving to purchase our first home, with the goal of 2020 in mind. Every month, we'd go to local open houses both in our price range and in our “reach/dream” range. Seeing the possibilities kept us motivated to stay on track whenever we'd be tempted to book a last minute vacation or spend unnecessarily on clothes. Furthermore, for this particular example, it actually gave us a great lay of the land. So when the perfect house in our price range did pop on the market, we felt comfortable putting in an offer and moving quickly since we had a pulse on things and we ended up moving up our purchasing timeline by a year as a result!
Remember to come back every other week as I tackle savings tips for every one of life's major milestones! Also, if you're feeling stressed about reaching your savings goal, relax! According to this article from Lexington Law, 2 in 5 Americans have less than $1,000 in savings, so you're definitely not alone if you're starting from square one. And while you're on their website, make sure to get your free credit repair consultation to get a jump on step #2 from this list!
Catch up on the Saving Series here:
List of 7 Steps To Reach Any Savings Goal:
Determine how much you’ll need.
Get your finances in order
Deduct any money already set aside from the goal.
Determine when you want to make your goal a reality.
Factor your fixed monthly amount into your budget
Choose the right savings tools
Find ways to stay connected to your “why”