Having a budget is only part of creating a good frugal financial foundation. You also need to set money saving goals and make them a key part of your budget.
Your money saving goals need to be specific enough to have realistic, achievable and measurable steps. A goal like “I wanna be rich” doesn’t cut it. Here are 3 achievable money saving goals to get you started.
Create an emergency fund
This is an important and basic money saving goal. It’s key to breaking the cycle of living paycheck to paycheck. Without an emergency fund or hitting the lottery, it’s very difficult to keep your financial foundation solid and progress forward to financial freedom when a flat tire, or a broken pair of glasses, can leave you juggling bills and paying late. An emergency fund is your cushion to help you get through a short bit of tough times without busting your budget.
To get started, look at your monthly budgeted expenses. Let’s say it’s $2,000. Set a money savings goal of $6,000 and then break that down into small steps with target dates. Set the first step at three months with a savings goal of $500. The second step at six months out with accumulated savings of $1,000. Keep going and marking off your steps until you reach your final goal of $6,000.
Saving such a sizeable chunk of money may seem overwhelming at first. That’s why breaking it down into smaller chunks with defined target dates will make it easier to manage financially and mentally.
Create an investment fund
Investing is one of the most common ways to make your money work for you and grow wealth. Don’t leave extra money sitting in your purse or in your checking account. Put it to work.
First, if your employer has a 401K or similar saving account available, make sure you participate. Every little bit helps. Even if you only contribute $20 per pay, do it.
Next, put your extra cash to work by opening an account with Robinhood or similar to start investing independently. Set a small, manageable goal. Pledge to invest $80 per month, that’s only $20 per week. At the end of the year, that’s almost $1,000. If you had invested in Apple 5 years ago, that $1,000 would have grown to $3,916. That $1,000 would have worked for you, instead of you working for it, bringing in over $2,500 extra funds into your bottom line.
Create an education fund
Do you have children? Sending them to college will be expensive. Loans and scholarships are not guaranteed. So, start early. Even as a baby, set up your child’s 529 savings account.
A 529 account allows you to set aside money for your child’s education without minimum or maximum contributions. And you can delay use of the funds to any age. Your 40-year-old kid is still eligible to use the funds in a 529 account set up for them. Plus, the money grows federal tax free.
But what if your child grows up and doesn’t want to go to college? No worries. The 529 savings can be used to buy property, or even start a small business. So no matter the road your child chooses for their life, you can help them get off to a good start.
Set a small monthly money savings goal, say $20 a month for each child if possible. And set a secondary goal to increase that monthly amount as much as your budget will allow every year. Your children will start their adult life with a solid financial foundation.
Now that you have set your money saving goals, stay motivated and accountable to your goals. Use a budget app to document and track your progress. If you fall short one month, try to make up the difference the following month to stay on track. If you find that you are falling short of the monthly goal repeatedly, consider getting a second job or working a side hustle to dig out of the hole.
Setting and keeping your money saving goals is an essential part to reaching your ultimate goal – financial freedom.