I think it’s important to identify realistic financial goals and break them down into smaller goals to help ensure that you’ll accomplish what you’d like and that you will be able to adequately pay for them.
An easy way to figure out how much you should be saving towards goals is
- Determine how much you want to save (how much it will cost)
- Determine by what date you want that amount saved
- Figure out how many times you’ll be paid between now and then
- Divide the total amount that you want to save by the number of times you’ll be paid in that amount of time
If you set a goal of saving $2,000 for vacation by July 27 and you know that you will be paid 11 times between now and then, then you know that you will need to set aside $182 from each paycheck.
If you decide that you want to buy a $200,000 house in 5 years and you want to have a 20% down payment at that time, then you can figure out that you would like to save $40,000. This can be broken down as
- $8,000 per year
- $667 per month
- $308 per paycheck (if you’re paid 26 times per year)
A way to make it easier on yourself is to setup automatic contributions each time you’re paid to a savings account that you don’t touch.
