STEP TWO

Think about your goals. If you have a partner, talk about these goals with them.  As a family, you may have differing goals for your finances; use this as a tool to come together on prioritizing financial goals for the whole family.

Savings are so important in order to have a successful financial future.   I look at savings as similar to the foundation of your home: if your foundation is strong, it holds and supports everything else.  If your foundation is weak, things could crumble pretty easily.

Once you’ve completed Step One, you will have a good idea on how much money you have left over to set aside for savings.  If there is nothing left, then it’s important to revisit Step One to see if you can reduce any of your variable expenses to allow for some savings.

The important thing with savings is having a target amount.   How much? Over what time frame?  What does that look like as a monthly amount?

In my opinion, savings goal number one should always be emergency savings. Experts recommend having three to six months of expenses saved, and of course you know what you need minimally to live each month because you’ve completed Step One!  Emergency savings will assist your family to stay secure if there is a job loss or an illness.  It will give you breathing room to make decisions and also give you a level of comfort that you will not have to borrow funds from family or friends or use a credit card or line of credit to get by.

Savings goal number two and onwards, are up to you!  What’s important for you?   Is it education savings, retirement savings, vacation savings, a downpayment on a home?   Once you’ve hit your savings target for number one, then you can redirect your monthly savings amount to something else.  Set some short, medium and long term goals and always set an amount for each goal.   Once you have some set amounts, try incorporating these into your monthly budget.  If it doesn’t work, extend the time for your goal, making a smaller monthly commitment.

Here is an example of a Financial Goals Worksheet:

 

Goal	Cost	Target Date	Monthly Amount Needed	Order of Importance
Emergency Savings	$15,000	24 months	$625	1
Weekend Getaway	$1,200	12 months	$100	2
Downpayment	$30,000	60 months	$500	3

 

Once you get to Step Four you can adjust your goals to fit within your budget.  For example, you may not be able to save $500 per month for the downpayment but perhaps you can do $300.  That means you can still reach your goal, but not in 60 months.  It’s very important to be flexible so that you do not get discouraged.

You may want to consider setting up separate bank accounts for each of your goals; this will allow you to segregate the money from your day to day banking account.

Stay tuned for Step Three tomorrow!

 

Shelley