Setting and Adjusting Your Savings Goals

Putting together a savings account is an important part of financial independence. Savings make it possible to withstand financial setbacks and to occasionally take risks for greater rewards. You already know that savings aren’t built in a day. It takes time to accumulate a fair amount of savings by setting aside some of your income each month. One of the best ways to help yourself save is to set savings goals. 

Not sure where to start? No worries, we’ve got a few useful tips to help you set and adjust your savings goals.

Defining Your Savings Goals

The first step is to set an initial savings goal. This can be how much you want to have in reserve or saving up for something specific. Your first savings goal typically comes from personal motivation, whether that’s a desire for financial security or an effort to buy something special. 

Here are a few ways you can define your savings goals:

  • How much you want in your emergency savings
  • How much you want to set aside each month for a vacation
  • The cost of something big you want to buy or gift
  • To keep your savings above a certain dollar amount
  • To save a certain percentage of your income

Remember that savings accounts typically work better the longer the money stays in the account, so long-term savings goals will typically be more beneficial.

Setting Savings Goals

How do you define your savings goal? This is often represented by the amount that you want to save each month, week, or paycheck. The two most practical approaches to savings involve taking a small amount out of each month’s income.

Percent Saving means that you take a certain percentage of your income each time you are paid. You can even make direct deposits if pre-arranged with your bank. Percentage savings can adjust to raises and better jobs easily and may fit easily into your household budget calculations.

You can also set aside a specific amount per month or paycheck. Let’s say you deposit just $50 a month into your savings. Over six months, that becomes $300, or $600 with every year you save at this rate. You don’t have to start big because you can adjust your savings goals as your income increases.

Different Types of Savings Goals

Committing to a savings goal can be short-term or long-term. A short-term savings goal may be easier to get started because you can see the celebration at the end. Short-term savings goals tend to have a specific target, like booking a weekend getaway, a new appliance, or a new personal car.

Long-term goals tend to relate more to your lifestyle. You might save a long time for a home down payment or make a habit of saving so that your safety net money continues to grow year after year.

When to Revisit Your Goals and Make Changes

When should you adjust your savings goals? When your financial circumstances change, so too will your desire and need to save. If you reach a goal you were saving for, you might choose a new short-term goal or transition to long-term savings.

If the amount you save monthly has become pocket change because your prospects have improved, congratulations! Time to update your savings to build a deeper nest egg. Being able to put a little more aside is always a good thing.  The same is also true if the recent increase in cost-of-living has cut into your funds. Modestly drop your savings goals or reduce the percentage that you save when money is tight.

If you find you have excess spending money at the end of the month, drop it into your savings and consider increasing the amount you save monthly. Unless you have a strong urge to splurge, you’ll enjoy saving yourself from a dip into a larger savings account later on instead.

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