Savings goals don’t have to be limited to material possessions or a specific balance in your bank account. Setting and pursuing financial goals can also lead to many positive personal benefits.
Though each individual’s financial situation and savings goals will vary, everyone can be saving for these five things.
1. Peace of Mind
Having a cushion of savings can give you peace of mind that if the going gets tough, you’ll be prepared. According to Northwestern Mutual’s Planning and Progress Study, money is the number one stressor for Americans. Money related stress can lead to health and relationship issues if left unchecked. Set a savings goals that will make you feel more confident in your ability to cover expenses should the unexpected happen.
One great way to get started is to figure the amount of money that you’ll need to cover 3 months or 6 months of your living expenses. In the event that you are left without a job or face a financial hardship, this cushion will make an unexpected blow to your bank account a little less severe. Rather than worrying about how to make ends meet, you will be free to focus on finding a solution to the problem.
Along with gaining greater peace of mind, having money in your savings accounts can lead to greater feelings of freedom and independence. Not relying on others to pay for your housing, utility, transportation, or food expenses is also a great first step toward pursuing even larger financial goals like saving for a big vacation or planning for retirement.
Gaining independence over finances is a big step that many young adults grapple with as they leave the security of their parents for life on their own. As tempting as it can be for young adults to lean on the support of their parents, a recent study showed the positive impact of developing financial self-efficacy (the confidence in one’s ability to manage his or her own finances) and overall well-being. In fact, financial self-efficacy was a better predictor of well-being in young adults than race, socio-economic status, or gender.
Prioritizing your savings goals and making a plan to pay yourself first each month demands discipline. Without a strong sense of responsibility for your financial goals, it can be very easy to walk away and resume poor spending and saving habits. The practice of moving a designated sum of money into your savings account each month requires you to maintain accountability to yourself and to others in your household.
4. Future Comfort
Where do you see yourself in 15 years? 25 years? Have you already begun to plan for the money to pursue this lifestyle? A popular old Chinese proverb says, “The best time to plant a tree was 20 years ago. The second best time is now.”
If you see yourself having the financial capability to travel on big vacations, enjoy time away from work with your family, or retire at a certain age, make sure you are positioning yourself financially to live that lifestyle. Set aside what you can and commit to building on these savings over time.
Putting money toward your savings as early as possible will make achieving your financial goals much easier. However, if you are later getting started, then resolve to put as much as you can aside and speak with a trusted financial advisor about how you can best grow your money.
5. Your Dreams
Whether you have always dreamed of buying a Jeep Wrangler for off-road riding, an RV for camping, a condo at the beach, or seat on the first private SpaceX moon flight, having big dreams can be a powerful driver in your financial journey. Big dreams paired with a realistic plan of action can motivate you to build savings to achieve your goals.
These big dreams can be likened to “stretch goals” which are often used in business management. Unlike “commit goals”, which are required to be met, stretch goals are goals that you may not know exactly how to meet at the time they are created. Using stretch goals to motivate you in your financial management can spark a renewed focus on pursuing the lifestyle of your dreams.
What are you saving for? Write down your goals today and set a plan of action to make these goals a reality.