How to Save for Multiple Goals

Planning & Saving
on September 11, 2013

Saving money is the best way for anyone to achieve financial security. Of course, very few people are in the position where they just want to save for one thing. In fact, most people need to save for multiple goals, such as college, retirement, a new home and/or an emergency fund all at once. Fortunately, it is possible to save for everything at the same time.

First Step: The first step is to make sure that you are at least saving some money every month. If you don’t already have an automatic savings plan, start by saving a set percentage of what’s left over in your checking account on the day before you get paid. This plan can be used by anyone who pays all of their necessary expenses as soon as they receive their paycheck and then spends any money left over until they get paid again. By transferring a part of what is left in the checking account to your savings account, your spending habits don’t have to change. Many people choose to start by transferring a small percentage of what is left over, then increasing this slowly over time.

Next: Make a list of your goals, how much you want to have for each goal, and how long you have to meet that goal. Using this list, rank each item in order of its importance. Then, allocate the money that you save for each month by percentage to each of these items.

Take, for example, a family that wants to save an emergency fund, a small amount for a vacation, their kids college, and retirement. After a discussion, they decide that the emergency fund is the most important, followed by college, the vacation, and retirement. From their savings they save 50% for the emergency fund, 25% for college, and 12.5% each for the vacation and retirement. This allows the family to save for the most important items the fastest.

As soon as the family reaches their goal for an item, it can be removed from the list and the money the percentage levels can be redistributed. In this example, as soon as the family has saved a sufficient emergency fund, they would start saving 50% for the college fund and 25% each for the vacation and retirement.

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