Saving for a rainy day? You should. The storm clouds are brewing.
The average Canadian saved 14.9% of their disposable income in 2020. This sounds like a lot of money.
But you can run out of your savings quickly if you lose your job or have an emergency. If you want to be smart with your money, you need to develop a savings goal.
Yet what is a savings goal like? How can you pick the right goals for you? How can you start saving your money?
Answer these questions and you can protect yourself and your money for years to come. Here is your comprehensive guide.
Understand a Savings Goal
A savings goal is a particular objective you want to meet by saving money. You may want to save money so you can go on vacation or cover the expenses of a wedding. You can also save money for retirement, emergency expenses, or paying off debts.
Your goal should be specific and manageable. You should be able to track your progress to your goal and take steps so you stay on course.
Do not just say to yourself, “I want to save a lot of money.” That goal is too generic and hard to track.
You can say, “I want to have enough money by 2024 to go on vacation to Mexico.” Imposing a savings deadline can give you the motivation you need to meet your goal. Giving yourself something you want to buy lets you determine how much money you need to save week-by-week.
Learn About Financial Planning
Before you start on your savings strategy, you should understand how to make financial goals and plans. Talk to a financial advisor about how financial planning is done.
If you don’t have a savings account, you need to open one. Ask your financial advisor and boss to automate savings. They can send money from your paycheck into your account.
Keep in mind that there are different kinds of savings accounts. You can grow your savings in a high-interest savings account, though many accounts have rules about withdrawals. Consider your different options at a few banks before you select one.
You should also visit websites to read guides to money-saving strategies for young adults. Small things like comparison shopping can help you reduce your expenses and put money in your savings account.
Distinguish Between Short-Term Financial Goals and Long-Term Goals
Saving for vacation is a lot different than saving for retirement. You can save enough money to go on vacation over the course of one or two years. Saving for retirement requires decades of work.
You may need to save for short-term goals and long-term ones simultaneously. An easy way to track how each of your goals is doing is to open separate accounts for each one. Put money for your vacation in your savings account and put money for retirement in a retirement account.
Most short-term goals are optional. A mandatory short-term goal is an emergency fund. The fund should have enough money to cover your expenses for three months after you lose your job.
Start with your emergency fund, then move on to your other short-term goals. You can focus on your short-term objectives, but make sure you put a little money into long-term ones.
Be patient with your long-term goals. You can get help from financial advisors, banks, and friends.
Think About Your Life
Think about what you want in life. If you want stability, you may want to buy a house. If you’re interested in adventures, you may want to move out of town.
Your financial goal should satisfy a deep desire of yours. Your objective may be personal, and adventurous goals may be hard for people to understand.
That doesn’t matter. As long as your goal helps you fulfill your ambitions, you should pursue your goal.
Develop a Savings Strategy
If you’re having trouble picking a goal, you can think about savings strategies. A savings strategy involves a few different approaches that help you save money. You should develop strategies for short-term and long-term goals alike.
Don’t pick a goal just because it is easier to reach. But you can prioritize easier and more realistic goals.
Track Your Spending
The more money you spend, the less money you save. Sit down and write out your budget for the month. Itemize everything, including how much money you spend on entertainment.
You should first figure out how you can reduce your overall expenses. You should reduce your discretionary expenses as much as possible. Don’t order takeout as often and try to avoid buying movie tickets.
You should then go through your budget item by item. You can go to a different store so you spend less money on groceries. You can reduce your energy bills by unplugging your appliances when you are not in the house.
Monitor your bills through time. It is okay to spend a little more money during one month. But if there is a significant spike in your expenses, figure out why.
Try setting some purchasing rules for yourself. If you can borrow an object from someone else, you shouldn’t buy it. Every time you buy an object, you should sell something and make the same amount of money back.
Pay Off Your Debts
Your debts are your biggest obstacle to financial stability. You may not be able to retire or spend money on a vacation before you resolve your debts.
Talk to your creditors and develop a payment schedule for them. See if you can make additional payments every month. Make those extra payments whenever you can, as you will pay off your debts sooner.
You can prioritize the debts that you can pay off first. If all of your debts have the same schedule, you can rank them in order of importance. Debts that affect your living situation are more important than debts on your car.
Start throwing money at your debts right away. Any extra money you have after you create an emergency fund can go toward your debts. Once you’re done with them, you can transition to other goals.
Take Small Steps
Meeting any goal requires a lot of work. You need to take steps every day to hit your target and track your progress. But if you think about your goal all the time, you may feel overwhelmed.
Set a task for yourself at the start of each week. You can decide that you want to save $25 by the end of the week. Then focus on this weekly objective instead of your broader goal.
Your tasks can get more ambitious over time. If you find saving $25 a week easy, you can try saving $30 a week.
But don’t become worried if you cannot meet your small goals. Saving $20 instead of $25 is still a step in the right direction. Do whatever you can to save money and learn more about good financial practices.
You should review your budget and bank accounts every month. Try to find a time when you can focus on reviewing your finances, like a Saturday.
Develop an Alternative Income Stream
The easiest way to save more money is to make more money. If you have an hourly or part-time job, you should try to get a full-time job. You should apply for promotions, and you should look for jobs with other companies so you can earn more.
Try using your time on weekends to earn money. Consider working a part-time job or an internship on Saturdays and Sundays.
You can also use your hobby to make money. You can try busking, or you can sell art in galleries. Talk to a school about teaching kids math and science skills, including through online courses.
You can invest your money in a business or financial venture. Yet you should be cautious with your investments.
You should ask a financial advisor to look over the investment terms so they are legitimate. You should track the investment through time and see if you are earning money. You may need to remove money so you can invest in other things.
Take advantage of one-time income opportunities. You may receive some money as a gift from a family member. Put the majority of this money in your savings account and invest the rest.
Yet you should take care of yourself. Study the symptoms of burnout and seek psychiatric help if you are feeling stressed about your money.
Study the Essentials of Savings Goals
A savings goal can be anything. You may want to save money for a house, a vacation, or retirement.
You should think about what financial planning looks like. Then you should reflect on your life and aspirations. Pick short-term and long-term goals that will make you comfortable.
Start saving money today. Track how much money you spend, including on your debts. Earn as much money as possible and put all of your extra money into your savings.
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