How to Save for Multiple Goals

It’s hard to consistently save money, let alone save for multiple goals. As hard as it may be, it is mandatory to ensuring you can achieve all of the things you want, when you want them.

When I work with clients, a common question I’m asked is how to save for multiple goals. More importantly, how to prioritize those goals and ensure that nothing is getting put on the back burner.

It is very possible to save for competing goals at the same time, but there is a process to it. Much more goes into saving money than transferring a set number into your savings account every month. A realistic budget needs to be in place, a mindset shift needs to happen, and certain tools are mandatory for success.

Once you have everything you need in place to become a money-saving success, you’ll certainly want to implement it! I’m going to walk through the steps that should be followed when saving for multiple goals. It can be done, just be prepared to work for it!

Step #1: Know Exactly What You Can Afford to Save

Before you do anything, you need to know what you’re working with. You need to have a solid budget in place that outlines a few things:

• What money is coming in each month
• What money is going out each month
• What money is left over

Now that you have these numbers in place, you can see what is left at the end of the month. If little or nothing is left over, take a look at your fun or discretionary spending to see where you can cut back. If you don’t have fun or spend unnecessary money, but still aren’t left with much, it’s time to look for more income. Check out 8 Easy Ways to Make Extra Money or consider getting a second job.

Since you now know what you have left over at the end of each month, you have a good idea of what you can afford to put towards your savings goals. Now it’s time to move on to the next step!

Step #2: Assign Dollar Amounts, Deadlines and Importance Ratings to Your Goals

Just like you can’t start saving until you know how much you have to save, you can’t save for specific goals unless you have the details about them. Think about all of the goals you want to achieve that require savings. It can be travel, starting a business, saving for a down payment, or anything else.

Once you know what goals you want to achieve, list them out on a piece of paper. Think about how much money you need to save before you can reach those goals. Whatever that dollar amount is, write it next to the goal. For example, if your goal is to buy a house worth $300,000 and you want to save 5% for the down payment, your goal amount would be $15,000.

After you assign dollar amounts to the goals, specify when you want to reach the goal by. Give the goal a deadline. I can’t stress the importance of being realistic when it comes to specifying your timeframe. If you only make $60,000 annually and your monthly expenses are $3000, it’s not feasible to save $20,000 in 6 months. Keep your current situation in mind when assigning deadlines. Blessings may come your way, but until we know for sure, we can’t count on them.

Lastly, order your goals by their importance. Lump goals with the similar deadlines together, then order them by importance.  If you have 3 goals that you want accomplished in 1 year, the most important of the 3 goals is what should be the primary focus, followed by the second and third.

While saving for a house in 10 years may be your most important goal, it shouldn’t be lumped with saving for an emergency fund in 2 years. The timeframes are very different, and you’ll likely achieve your emergency fund before you house savings, even if you focused on the house first.

It’s wonderful to have many goals to strive for, but when income is limited, it’s best to focus on 1-3 short-term goals (less than a year and a half) and 1-2 longer term goals. When you save for 5-6 short-term goals that you are saving for at the same time, you may not see as much progress because your funds are spread thin. Keeping the focus limited allows you to see your progress faster, which keeps you motivated.

Step #3: Calculate Your Monthly Savings Amount

Now that you know what you can afford to save each month, and you know which goals you are going to focus on (and the details of those goals), you can calculate your monthly savings amount for each goal. Here’s an example:

After looking at your budget and making some spending cutbacks, you determine you can afford to save $250 every month. You’ve decided that the goals you are going to focus on are as follows:

• Save $1,000 for small emergencies by the end of 8 months.
• Save $2,000 for a car down payment by the end of 18 months.
• Save $5,000 for large emergencies by the end of 36 months.

To reach your first goal, you take $1000 (the goal amount) and divide it by the timeframe (number of months you have to achieve the goal). When you do that, you see that you need to save $125 every month to hit your goal by the deadline.

For reaching the second goal, follow the same step. Divide the goal amount ($2000) by the number of months you have to achieve the goal (timeframe) and you get about $115 every month.

Finally, to reach the last goal, follow the same steps. Your calculations should show you need to save about $140 every month for 36 months to reach your goal.

So, if you have $250 to contribute to your goals every month, you know that you can currently only afford to save for the first goal ($125), the second goal ($115) and have about $10 left over for your last goal.

At the end of 8 months, once your first goal is achieved, you can contribute that $125 to the $10 and have $135 going towards your last goal.  That’s only $5 less than you need. It may not be the desired amount, but it’s close. Plus, maybe you can give up one latte a month and then you’ll have your goal savings amount!

Step #4: Get Your Accounts Set Up Accordingly

Since you now know you can save for all 3 of your goals (even if that last goal won’t be a significant savings until after 8 months), you can get your accounts set up. It’s best to open an account for each goal. I recommend online bank accounts because they aren’t as easy to get to as your normal bank’s saving account, they earn more interest on the money that’s in there, and there are no fees associated with these types of accounts.

Wherever you decide to open your savings account, make sure you name each account for the goal that the account is associated with. This approach was mentioned in the 5 Ways to Make Saving Money a Habit article, and it works! The assumption is that you are far less likely to pull money out of an account named “My Emergency Fund” than an account with no name. The temptation to take money away from your savings goal is a lot less when your goal is staring right at you.

Step #5: Set Up Your Transfers

After you’ve created your goal savings accounts, and named them, it’s time to set up your transfers. I recommend the transfer come directly from your paycheck, so there is no effort on your part and no chance of forgetting to transfer. You can also set up automatic transfers from your checking to your savings.

If you are paid weekly, divide your monthly goal amount by 4. For the examples above, your weekly deposits into savings should be $31.25, $28.75, and $2.50. You may be smirking at the $2.50 deposit, but it will add up! The same theory applies for bi-weekly paychecks. If you are paid once a month, you already know the amount.

Related: The Best Way to Set Your Money Goals

Once Steps #1-5 are completed, it’s only a matter of time! Do your best not to touch your savings, and if you come into extra money, put it towards your first goal! If you can knock that goal out sooner, you can start saving more to your other goals earlier. As you knock your goals out, refer back to your original list and add another goal into the rotation.

Have you mastered saving for multiple goals? What tips can you share when it comes to saving for competing priorities? Post a comment below, I’d love to hear from you! Be sure to ask any questions you may have also!

-Raya

The CGS Team