In difficult financial times, it is more important than ever to save your money. A small savings will help you pay for unexpected emergencies like car trouble and health problems, but the general recommendation is to save 3-6 months of expenses. With a sagging economy, you never know when you might lose your job or see a cut in your hours.
You may have a financial goal to save up three months of expenses in the next 12 months. Just for an example, let’s say you have $2,000 in expenses a month. Your goal, then, is to save $6,000.
A recent study by Rice University and Old Dominion University discovered that people are more likely to meet their long-term financial goals if they set short-term financial goals to get there. In our example, if you wanted to save three months of expenses in 12 months, you are more likely to reach your goals if you break your savings goals into shorter time periods.
You can set your goal of saving $6,000 into 12 monthly goals of $500 each. That might work well for you. Breaking your goal into bi-weekly goals of $250, or a weekly goal of saving $125, might also be easy. By breaking your goal into short-term goals, you might also see that this goal is too difficult to reach. Perhaps you are living on a tighter budget and can only manage to save $65 a week. By breaking your goal into monthly or weekly goals, you will realize that without earning extra income, it will take you almost two years to save enough money to reach your goal. You can also choose to start with a smaller savings goal, such as setting aside $1,000 to pay for unexpected expenses like car repairs.
If you set a savings goal, you should consider putting your savings into a separate account. If you mix your long-term savings with your regular spending money, you might see that extra money in your account and be tempted to spend it. Many banks will allow you to easily transfer money between accounts online, even if you are using different banks. Free financial software is available at places like Mint.com that can help you track the money in all of your accounts in one place.
Whether you are saving a small emergency fund, a larger expense in case of a layoff, or even for that trip to Europe that you’ve always wanted to take, setting short-term goals will make it more likely that you will get there. Saving money often takes sacrifice, but consistently taking steps to reach your goal is often better than intermittently working to get there.
Maxwell, Kristin. “Save More Money: A Simple Trick”. Shape. February 2009, p. 27.
Serra, Dan. “Short-term Financial Goals May Be More Reachable.” Catholic Online. http://www.catholic.org/finance/finance_story.php?id=29345