It's exhilarating when you finally catch on to the power and freedom that comes from saving money to pay for things rather than using credit cards and loans. But, unless you're a professional, it can also be overwhelming as you try to keep multiple objects airborne without dropping one (or all) of them.
Sure, you no longer question whether to save a certain percentage of your income every month, but a new question emerges: which goals should I direct the savings to? Just thinking about all the ways you need and want to use your hard-earned savings can quickly lead to discouragement. How will your savings ever stretch far enough to accomplish everything?
The best way to tackle these feelings is to start making lists, evaluating things, and, yes—crunching the numbers. It is possible and realistic to juggle multiple savings goals at once. You just need a plan.
Sort your goals: List everything as a "need" or a "want"
It's bound to feel overwhelming just thinking about how to juggle multiple goals, so getting things out on paper brings it back to reality. The purpose of categorizing goals as needs or wants can ensure you're prioritizing needs without excluding wants.
If you need to save money for anything that falls under categories such as food, clothing, or shelter, put those first. There are also long-term needs to consider, such as having a sufficient emergency fund and setting aside income for your basic food, clothing, and shelter needs after retirement. These might not be in the forefront of your mind or seem urgent, but they're needs, nonetheless.
If your needs overshadow your wants right now, it can be hard to stay motivated to keep saving (although there will be enough motivation when you succeed in getting some of those items off the list!). That's why including at least a few wants in your blend of savings goals can help keep you engaged over the long haul.
Narrow your selection: Rate everything by urgency and personal value
Within these categories, there will still be some competition. You may not be able to juggle all of them right now, so select your top needs and wants by rating each goal's urgency as well as its personal value. For example, if your current vehicle is on the fritz, purchasing a new one is more urgent than saving for a vacation. If you haven't had a vacation in 10 years, its personal value may outweigh the importance of a renovation on your home (unless you're preparing to sell it—you get the picture).
If you find it hard to judge what's more urgent, consider the negative impact on your finances if you don't respond to something and the positive impacts if you do. Going into debt to purchase a car when you hadn't planned for it could hurt your credit score and ability to accomplish other savings goals, while purchasing a newer vehicle with savings now might also save on repairs, missed work, and thousands of dollars of interest on a loan or credit card.
Establish time frames and set up sinking funds for your goals
Deciding which savings goals to work on first—and how much money to set aside now—is also easier if you know how soon you'd like to accomplish them. If your daughter will be graduating in 10 years and you have a rough estimate of her college tuition, divide it out to determine how much you'll need to set aside yearly and monthly. Even if the goal is as short-term as holiday spending, setting up a time frame and saving incrementally (known as a sinking fund) will make both the experience and perception of saving for it easier.
Determine your "juggling" method
There's no one, perfect approach to juggling multiple savings goals. It all depends on your personal mix of goals—whether needs or wants, short or long-term—and how far your monthly savings budget can stretch.
The percentage method—dividing your monthly savings percentage into smaller percentages—allows you to whittle away at multiple goals at once. This can ensure you aren't neglecting to save for important needs such as retirement, yet you still get to set aside money for things you want.
Others prefer to systematically knock out multiple goals one by one, getting smaller or more urgent goals out of the way so they allocate more savings to larger, longer-term goals in the following months. You might notice that this resembles the snowball method for debt elimination.
Where you put your savings: It matters
Saving is saving, but there are advantages to certain accounts depending on the immediacy of your goal. If you plan to reach your goal within the next few years, a high-yield savings account will give you the best short-term return while keeping your funds easy to access when you need them. Longer-term savings are better off invested in stocks, bonds, index or mutual funds, and tax-advantaged accounts like 529s, 401(k)s, and IRAs.
Juggling multiple savings goals can feel overwhelming, but with a plan and plenty of practice, the task isn't as impossible as it looks.
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