Through careful budgeting, you may find you can save more money each month than you thought you could. But how much is enough? That depends on your personal financial goals. Understanding what those goals are can help you determine what you need to save. Also, when you know what you’re saving for, it’s easier to make the necessary sacrifices. A good way to think about and categorize goals is by their time frame.
Short-Term Goals — These can include saving for holiday gifts, furniture, or travel. By putting aside money for these items in advance, you’ll save by limiting the amount of money you’ll need to borrow later on. Also, there are many expenses that may not be part of your monthly budget, such as year-end taxes, insurance, and scheduled car maintenance, that nonetheless need to be accounted and saved for in advance.
Medium-Term Goals — These can include saving for your next PCS, a family vacation, or the down payment on a car. Having money set aside will not only help pay for these items but, most likely, will make financing easier to obtain.
Long-Term Goals — These can include saving for a newborn’s education fund, your own retirement, or the down payment on a house. Even if the more immediate need to pay down debt may supersede saving for these goals, the sooner you can begin saving, the better off you’ll be.
Although you may not know what all of your goals are right now, you will know some of them. When you have specific goals, it is easier to see if your rate of saving is adequate to achieve those goals. Also, having specific goals can help you make informed decisions about your budget. Even if you are uncertain about your goals, the more you are able to save now, the more choices you will have later on.
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