by: Matt Reiner
When it comes to setting financial goals, two fundamental aspects that need to be addressed are: saving and budgeting. Although this duo may not be as enjoyable as maybe chocolate and peanut butter or wine and roses, they are essential to help us get to the desired future that we want. And that future doesn’t always have to be retirement. Maybe our goal is a future trip that we want to take in six months or a year, an upcoming newborn, or becoming a homeowner. The future doesn’t have to be so distant, but these fundamentals hold true regardless of how far away our aspirations are. Let’s take a deeper look at some ways to help you become better at saving and budgeting.
The first step is set specific goals. Focus on SMART goals; specific, measurable, attainable, reasonable, and time-bound. If it’s something short, like buying a new house, what is the amount of the down payment? What do you already have in cash? And what are you going to need? Set that as a goal. And then see how much you can save every single month to reach that goal based on income and expenses.
The second is to automate savings. Automation is so fundamental in terms of being successful with budgeting and saving for future events or desires that you have. When we automate our savings similar to our 401(k)’s and 403(b)’s at work, we have it automatically taken out of our paycheck. If you can’t automate contributions directly from your paycheck, try setting up recurring contributions on a specific day with a specific amount to go into a savings account. Treat it as if it was a bill on auto-pay, except you are paying yourself. Automation is immensely valuable to help you to reach your financial goals, because if you don’t automate, too often our minds tend to convince us not to do it and just delay it. And we all know that delaying savings can be the Achilles heel to helping us reach our financial goals.
The next step is don’t just your save money but look to invest your money. This can help you grow money over time. Something that needs to be made clear is that if you’re saving money for the short term like the next three months, six months, 12 months, maybe investing isn’t the right move. You can save money and use it over time, but if you’re saving for something in the distant future, such as retirement, investing could help you get there faster. Don’t just think about this as saving into a banking account or a checking account, but think about it as saving money to invest for those long-term goals as well.
Although it’s no fun whatsoever to create a budget, it’s extremely important in helping you attain your future goals. You don’t have to create this intricate Excel spreadsheet or even use an app, just start with a framework for a budget. What are you going to try to spend on your credit card per month? What are you going to try to spend on your entertainment per month? Think about a simple way to budget and try to stick to it and then build on top of that. What we tend to see so frequently is people try to build this unattainable budget in Excel that’s too strict and they never keep up with because it is too demanding.
Keeping it simple can go a long way, and building on a solid foundation is the best way to establish strong and consistent habits. It’s a similar methodology that James Clear talks about in his book Atomic Habits. The same thing can work for you in creating a budget, but create a simple budget or framework that helps you understand how much you should be spending every week, every month, and maybe even every day to allow you to meet all of your savings goals.
The final point is…Slow and steady wins the race. This is the least sexy thing that you can do. We all want to spend our money on different material items, experiences, learnings, or whatever it may be. Spending is way more thrilling and more fun, and saving and budgeting is boring. What I can say is if you can make saving second nature and have it happen in the background through automation and a small amount of planning, you’re going to be much happier in the future. Saving for your future goals while balancing your current goals, can lead to a better outcome than going one side or the other. So, start saving today.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions