Budgeting: Savings Goals
If you’re saving without a specific purpose in mind, it can often be easy to withdraw money without worrying. Should you overspend on a shopping trip, you’ve still got the buffer of your savings, right? If this only happens occasionally, it’s not really an issue, but if it becomes a habit, you may find that you don’t have any savings left.
This is why it’s recommended to have a savings goal. If you’re putting money away towards buying something in particular, you’ll be more driven to save more. This can be one big thing, or several smaller targets.
Have a Specific Goal in Mind
Whether it’s a big holiday, a new car, or something easily achievable, it’s good to have an image in your mind of what you’re working towards. You may simply wish to build up a fund for Christmas shopping. As long as it’s something you can visualise, and not too impossible, you can save for just about anything.
Once you’ve picked your goal, you’ll need to work out how much money you’ll need to save in order to achieve it. Then you can create a savings timeline.
Create a Savings Timeline
It can be easy to decide that you want to go on the holiday you’re saving for next summer, and then create a savings timeline based on this. But if the round-the-world trip you’ve got your heart set on will cost a few thousand pounds, and your income only allows you to save £50 a month, this won’t be an achievable goal. It’s therefore important to consider how much you can realistically save each month, and then structure your timeline around this.
It can be helpful to set monthly or quarterly targets too. That way you can easily see if you’re keeping on track for your end goal. These monthly targets may fluctuate though – you probably won’t save as much in December as you would in February, for instance. Keep any big events, birthdays, or large expenses (such as a yearly car insurance payment) in mind when creating your timeline, so that you don’t have to save as much those months.
● When it comes to saving, it’s a good idea to have a specific goal in mind, such as a holiday or a deposit on a house
● Be realistic with your savings timeline, and consider which months are always more expensive for you
● Set monthly targets as well as an overall goal
● You can use a number of tools to help you save, like savings apps and ISAs
● It’s important to track your progress, to see if you need to adjust your timeline. It’s also good to reward yourself for meeting goals in order to stay motivated
The Right Tools
It’s often easy to spend money if you can see that you have it in your bank account. So one of the best ways to save is using an app, or setting up a standing order, to move your savings across to another account when you’re paid.
There are loads of apps on the market that can help you save money. Some of them charge a small monthly fee, but you can also download free savings apps that work just as well. For example, Plum analyses your daily transactions to learn about your income and spending, and will then automatically set money aside for you. Chip also automatically saves money for you, and allows you to set and track goals.
You may also consider investing your savings, particularly if you have long term goals in mind. Over the course of a financial year, a Cash ISA will allow you to earn interest tax-free, on savings up to £20,000, for instance. Or if you’re trying to save up a deposit for a mortgage, with a Lifetime ISA the government will grant you up to 25% of the money you save each year.
Track Your Progress
Regardless of whether you’re putting your money into a savings account or investing it in an ISA, it’s important to track how much you’ve saved. If you’re not quite meeting your timeline goals, you can try and figure out why, and reassess your strategy. Perhaps the goals were not completely realistic – you may need to create a new timeline.
If you are hitting your targets, it’s equally as important to reward yourself. This will keep you motivated, and help you stay on track.
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