Help & support
Whether it’s a holiday, a wedding or preparing for a career break, learning how to set short-term savings goals is key to managing your money and living the life you want.
While using debt to fund such expenses is always an option, saving up in advance avoids incurring the additional cost of interest payments on that debt.
Plus, saving in advance is also a way to maximise your enjoyment of your chosen goal, by increasing anticipation and allowing you to look forward to the upcoming event.
Of course, it’s important that we save for our big, long-term goals, such as a comfortable retirement. But being able to set and achieve smaller financial savings goals along the way is an important part of financial fitness too.
So, whether it’s a new pair of shoes or that trip overseas you’ve been dreaming of, here are five steps to nail your next savings goal.
Step 1. Choose one goal to focus on
There is no shortage of enjoyable things we’d all like to do in life. But honing our sights on one chosen goal at a time can help to focus our minds.
Make a list of all the things you would like to save for, and then pick the one you would really like to focus on first. Try to make it as specific as possible, for example not just ‘travel more’ but ‘a trip to Japan’.
Step 2. Set a price tag
Spend some time doing research to figure out the approximate cost of what you would like to save for. If you are saving for a holiday, consider all the costs, such as travel, accommodation, food, insurance and entertainment. Set approximate budgets for each.
Events such as weddings or purchases like renovating your home can often end up being more expensive than we plan for. Try to build in a realistic buffer.
Finally, commit to the exact dollar amount you intend to save up to fund your chosen goal.
Step 3. Set a deadline
Considering your regular income and expenses, figure out approximately how much you could regularly save each week, fortnight or month towards your goal.
Use this as a rough guide to choose a date by which you would like to hit your chosen savings goal.
Step 4. Chunk it down
Take your price tag and your deadline and figure out how much you need to set aside regularly to meet your goal.
For example, if your goal is to save $2,000 for a holiday in 12 months’ time, that would mean setting aside $167 each month, or $38.50 each week.
Step 5. Automate your savings
To help avoid the temptation to spend your savings, consider setting up an automatic transfer of your chosen savings amount into a separate account. It can help to name that account something meaningful like ‘My Japanese Holiday’ to help fuel your motivation.
You can also experiment with visual trackers to help you mark your progress towards your goal.
Make sure to celebrate your success and enjoy your well-earned experience or purchase!
Congratulations, you’ve completed this lesson!
Next lesson: 4.5 - 5 small steps to learn to invest