Setting a savings goal is one of the most important steps you can take to achieve financial success. Having a savings goal will give you direction, help you stay focused, motivated and will also ensure you are on track to reaching your financial objectives.
The toughest part about setting a savings goal for yourself, is determining how much you need to save and how to get started. Well, lucky for you, we’ve decided to save you the headache! We have put together a set of steps and are sure to get you on the path to financial success!
Let’s start with the basics – so what is a savings goal?
Setting aside an amount of money on a regular basis for a specific purpose in the future, is known as a savings goal. Savings goals can be short-term, such as saving for a down payment on a car, or long-term, such as saving for retirement, and yes, you can have more than one savings goal too!
Why is setting a savings goal important?
A savings goal ensures you are living within a budget and making wise financial decisions. Therefore, setting a savings goal, will help you focus on the outcome and will also enable you to calculate backwards thereby determining how much you need to save in order to achieve your goal.
Needless to say, setting a savings goal is also a measure of success, and tracking it will enable goal-setters such as yourselves to understand how much has been saved thus far, and how close you are to achieving your goal.
Key steps on setting a realistic savings goal
Setting a realistic savings goal can be intimidating, but it doesn’t have to be. Here are some steps to help you get started:
1. Define the purpose of your savings
What do you want to save for and how much money do you need if you were going to purchase it today?
2. Determine the time frame
When do you need the money, and how long can you save for? This will help you determine how much you need to save each month, and where.
3. Always take inflation into account
The cost of goods and services increases over time due to inflation. For example, something worth $5,000 today will cost $8,100 in ten years’ time if inflation is 5% per year. A calculator can help you understand the impact of inflation.
4. Create a budget
Creating a budget is an important step in setting a realistic savings goal. You need to know how much you can realistically save each month and what expenses you need to cover.
5. Decide where to save
Short-term goals require simpler solutions – you may be able to achieve your goal just by setting money aside and will need to be able to access your savings quite quickly – so a simple bank account may suffice. Conversely, longer term objectives necessitate more planning and discipline. You may need access to the greater returns of investment markets to be able to beat the impact of inflation.
HAYAH’s Smart Saver gives you affordable access to worldwide funds and helps you throughout your journey with regular check-ups.
Determining where and how much to save
Once you have set a timeline and understood the future value of your financial goal, you next need to determine how much you need to save each month to reach your target (if it is affordable) and how much risk you’re willing to take to meet (or not meet) your objective.
The global stock market is one of the best ways to beat inflation and create wealth over the long term. However, the selection of individual stocks is best left to experts – after all, why complicate matters when you can choose from mutual funds that invest in multiple assets, all of which are selected by professional fund managers!
Mutual funds follow an asset allocation which divides the investments between different types of assets such as stocks, bonds, and cash. Using mutual funds means you can spread your risk over multiple individual assets easily and select investments that align to your specific risk appetite and goals.
Our Smart Saver includes a calculator that runs thousands of scenarios for how your savings may perform if invested in global markets. We recommend exploring the Smart Saver dashboard and calculator to understand how different risk levels influence the likelihood of meeting your targets.
Final words on meeting your savings goals...
In order to achieve financial success, always remember to set yourself realistic savings goals. For every savings goal, it is also extremely important to set a timeline, create a budget, and calculate how much you need to save to reach your goal by taking inflation into account.
Most importantly, don’t fuss with reinventing the wheel. Embarking on your savings journey is very simple and straightforward. You can start saving with Smart Saver in minutes and begin building your wealth today!