Setting Goals
Financial goals are specific things that you want to achieve rather than a vague idea of what you want to be able to do in the future. Before you start to save, determine exactly what you want, when you want it, and how much it will cost. There are three basic goal types: short-term, mid term and long term. Short term goals are achievable within twelve months, mid-term goals are achievable in two to five years and long-term goals are achievable in five years and more.
If you have more than one goal you can decide to work towards achieving them all at once, or you can decide to concentrate on one at a time, not moving onto the next goal unless you achieve the first one. In either case you must calculate the amount you need to save to achieve each goal.
Short and Long Term Goals
For short and mid-term goals, the calculation for how much you need to set aside each month is simply the cost divided by the number of months you have given yourself to achieve that purchase. For example, a computer may cost $1200, and you would like it in twelve months. To reach that goal, you will need to set aside $100 per month ($1200/12).
The calculation for long-term goals is a little different because during the time you have allocated to achieve the goal you should be earning interest on the savings which will have the impact of shortening the time it takes to achieve the goal. The interest you earn depends on the investment you choose, the higher the interest the greater the risk. Be careful of promises of high returns with little or no risk, if it sounds too good to be true then generally it is.
Be Flexible
When saving for goals, be flexible, if one week you can't afford to put away the amount you thought you could, don't be too hard on yourself. Sometimes these set backs may cause you to consider giving up completely, but it is a better option to think about extending the goal achievement date, reducing the goal amount, or increasing your income so you can save more.
Write down your goals
List your goals and noting the date you want to be able to achieve your goal, the total cost , less any savings you already have, giving you the balance you need to save to be able to make your purchase. Then calculate the number of pay periods you have to your target purchase date and then calculate how much savings you need to put aside each pay period in order to achieve you goal. If this amount is unreasonable you can rethink your target date.
Use this simple spreadsheet to chart your financial goals: