70% of Savers Forget To Do This One Critical Thing
Many people focus on saving money. But do you have intentions beyond merely saving?
The good news is that most people save money from their paychecks. The bad news? Many people don't set up savings goals for those funds.
NerdWallet recently conducted a study analyzing the savings habits of more than 2,000 people. It found that up to 70% of people save money, but don't have any clear goals for those funds.
Without any clear objectives, it can create a murky picture of your finances. This is why it's vital to set savings goals, and I'll show you how to do so in a way that adapts to your financial needs.
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The obstacles to setting savings goals
Having a goal isn't about just crossing a financial item off your to-do list. It's about creating accountability.
Greg Welborn, president and financial advisor at First Financial Consulting, told Kiplinger, "There are many reasons why people won't set goals. They could be afraid of failure, or they fear encountering what their financial situation really looks like."
As we know, money means different things to different people. It can denote security, love, power, prestige and status. "For some, they're prioritizing a lifestyle over a financial goal," Welborn adds.
Another common reason is self-doubt. Many people think they'll never be wealthy, so why even try?
That, coupled with the sheer amount of financial resources, can make setting goals seem overwhelming for many. Creating goals, no matter how large or small they might be, is a vital first step to set you on the road to wealth. Here's how to do it.
Charting your road with purpose
Greg recommends you, "Don't be afraid to dream. Write down what you want to achieve financially. Yes, you might not achieve all of them right away, but starting with two or three provides an intention to your budgeting and spending, and it can change the way you think about how your money works for you."
A fresh perspective can also help and provide accountability. Whether it's a financial advisor, budgeting apps or a trusted friend/relative who's good with money, having another person working with you to achieve your goals takes some of the stress off.
Once you set a few goals, open a separate savings account to achieve them. This keeps your money separate from your main account, where it can become lost in the shuffle. I recommend a high-yield savings account because they offer higher returns with no account fees.
You can set up automatic transfers on payday. That way, you have a separate account where you can clearly see the progress, and you're not worried about that money being spent on everyday expenses.
Use this Bankrate tool to find the best high-yield savings account for you fast:
Maintaining accountability
Setting up goals is a great first step. But you also must follow through and assess whether you're reaching them over time. I recommend taking some time once a month or at least quarterly to track your progress.
This keeps your focus on achieving these goals. After a few months, it can also help you pinpoint behaviors that might prevent you from reaching or maximizing your goal, allowing you to make corrections.
And it's important to be flexible. "Maybe you're setting money aside for your child's college education, but then they receive a scholarship. Or they might want to go to grad school. Being adaptable allows you to better plan for future expenses, so you're ready to meet those goals when you need to," Welborn adds.
When you don't hit your target: Flexibility and intentionality
Failing is a part of growth. Greg equates to getting lost while driving. "Everyone becomes lost sometimes. But you don't give up and go back to where you come from. Instead, you get out a map, use GPS, ask for directions, then get back on the road to reach your destination."
The same applies to finances. Any time you make improvements, failure is a natural roadblock. To demonstrate, you might want to save $20,000 a year for a down payment on a bigger home. However, this year you only saved $10,000.
That doesn't make you a failure. Why? Because you still saved half of your goal, and you were intentional about doing it. You made a change that benefited you financially.
The goal doesn't have to change, but the timeline can. Instead of saving $20,000 in one year, maybe you do it in two or three years. What matters most is that you're being intentional with saving money for a stated purpose. Compared to someone saving without a goal, it's likely some of those funds would go for discretionary spending, and they might fall much shorter than what you were able to achieve.
Your savings goal checklist
To recap, here are a few things to help you set savings goals and keep them:
- Share your financial dreams by writing them down
- Pick out two to three that are the most realistic/you want to accomplish first
- Open a high-yield savings account separate from your regular accounts for these savings goals
- Develop accountability by sharing your goals with an advisor, banker or trusted loved one
- Review goal progress monthly or quarterly
- Give yourself the grace to fail
- Adapt as life's circumstances change
Ultimately, setting goals is the foundation of successful savings. By writing your dreams down, picking out a few and pairing them with concrete steps like opening a dedicated savings account, you transform hopes into achievable targets.
Just know, even if you have struggled with this, your situation isn't hopeless. Greg adds, "I've been doing this for over 30 years. We have yet to encounter a situation where we couldn't help you achieve at least one or two of your goals." So, your dreams can become reality with the right approach.
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