We occasionally mention saving in most of our discussions on personal finance. Personal finance management can never be complete without saving. Saving is both a precursor to and booster of several aspects of your journey to financial freedom. Warren Buffet emphasises the importance of spending what is left after saving. This means saving should be the first priority. T.T Munger says that ‘the habit of saving is itself an education: it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind’. Here are important guidelines for setting and accomplishing goals on saving money.
Specificity Is Important
It is not particularly easy or even wise to merely save. Many people try this, which is why saving is difficult. Doing something with a goal in mind conditions you to be diligent. It gives you a sense of focus and direction as well. Specificity here can be defined in three broad ways: purpose, amount, and time. What exactly are you saving for? What is the exact amount you want to save? When or by when do you want to have saved that money? Clearly, answering these three questions is what constitutes being specific.
Growing up, I noticed this many times with my parents. They would save up for all the major assets they bought over time. This is just an example, but the principle is when saving, saving for or towards something. That also makes it easier to determine a specific figure you want to save. There are so many vital things you can save for or towards. Quick examples are retirement savings, emergency funds, buying some assets, money for an investment or to start a business, college funds (for yourself or kids), and more.
Lay Out A Clear Timeline
Once you have specifics clearly determined, it is time to lay out your timeline. This will help you break down the seemingly big task into smaller ones. Let us suppose you want to go for a holiday in Victoria Falls in August 2023. This means you that would want to have all the money in place by the end of July. From now that means you have about 9 months to save up. Let us suppose the money you need to save is US$500.
That means you have to save around US$60 every month. Breaking it down further means you would have to save US$15 per week. If you bring it down to per day, that would be roughly US$2.50 per day (assuming a 6-day work week). You see how that lays out the timeline and gives you an expanded view. This even conditions your mind to see how attainable it is and pumps you up. That is what you should do for any saving goal – lay out a clear timeline for it.
Have Goals For Each Month
Laying out your timeline will show you that you must set month-specific goals. It might seem obvious, but I want to underscore its importance. If you do not set goals for the month, time can pass you by unawares. You can easily get distracted and forget to do the needful. Plus, setting monthly goals helps you streamline your months effectively. Remember, you might have several saving goals all at once. You need to figure out how they relate to your month’s activities. We all generate money differently, so you must closely consider your context. Let us refer to our savings for a holiday example.
If you generate income daily, then it is easier to set aside something daily (US$2.50). However, most people realize their income at the end of the month. That means you would have to set aside the whole US$60 at once. Some might experience a windfall and decide to save, say, 3 months’ worth at once. All these dynamics can be better handled if you have goals for each month. Do not just end with ‘I will save US$500 by July 2023’. Bring it down to what you will have to set aside per month. This helps you to always keep in mind your savings journey.
Search For Ways To Save Even More
Saving will always be harder if your income is inconsistent or paltry. You must explore ways to generate more income so that it becomes easier. Tied with that is the need to save more. Yes, you would have set specific and time-bound savings goals. Let us go back to our holiday example. The goal is to save US$500 by July 2023. Your thrust should be to save even more than that. That will give an allowance for incidentals and even increase your flexibility.
Just because you can manage the US$60 per month does not mean you have arrived. Imagine someone starts wasting money simply because their savings goals are met. If you still have disposable income after fulfilling your regular savings premiums, consider saving more. Thus your aim must be to save more than you set out in the first place. You can also create other savings goals just so that you do not get to waste any money.
Choose The Right Tools
When you are saving, where are you keeping or putting it in? Saved money can be kept secure; some can even open a savings account. It is up to you, but keeping the money for long periods is most unwise. It would be best to figure out how to make it generate more if your savings are long term you can consider, for example, investing in mutual funds. Some can start or invest in a business to generate more money. These are all risky ventures, so you need to be sure the tool or vehicle you are using is the right one. Even keeping your money at home is a huge risk – it can get stolen or damaged. Choose the right tools!
These are the five important guidelines for setting and accomplishing goals on saving money. If you were not that successful in saving this year, make it a goal in 2023. Just make sure you strictly follow these five pointers.
