Last week I talked about saving for the little things, the ‘fun stuff’. But what about the bigger things? Your big ‘wants’. How do you plan for those? Maybe it’s an exciting vacation you’ve always wanted or that new car. Or maybe you just want financial security now (beefing up your emergency fund or by whatever means). Your ‘wants‘ don’t always have to involve ‘stuff’, but they should always align with your financial goals.
We used to go on one big trip out of the country, and at least one road trip a year. That’s what we looked forward to and our vacations were the big things we budgeted and saved up for. I remember a couple of my friends would say “I can’t believe you’re able to go here and there, we’re just struggling to get by.” The funny thing is, those same people were actually making double our household income. It all goes back to priorities. Some don’t like to care or think about what they spend, but then they always end up frustrated that they don’t have any money to spend on the things that they want.
Now, we don’t really get asked that question all that much, as all those vacations almost came to a halt when we had our first child. It’s not that we can’t afford it, we totally can, just our priorities have shifted a little. In fact, I think we’re actually in a better financial situation today, then we were then. It’s kind of funny, that only when we see people buying “stuff”, we think they must be doing so much better than we are.
Goals encourage saving
I was talking to an old friend of mine the other day and he’s almost done paying the mortgage on his house, and I joked with him, “So, what are you going to do with all that money when you don’t have to pay the extra fifteen, seventeen hundred dollars a month on a mortgage?” And he chuckled. He said his brother-in-law had just finished paying off his, a year and a half ago, and hasn’t seen a penny – It’s already all spent.
It’s easy to fall back into old habits when you have no goals. It’s not that saving is difficult. It really isn’t. But no matter how much savings are available to you, whether you just paid off a house or a car, or you get a raise, you’re just not going to do it, unless you make it a priority. Saving actually becomes quite easy, if you know what you’re saving for (and make it automatic).
Dream small, think big
Now I understand everyone has different priorities and dealing with all kinds of different situations, but everyone HAS to be working towards something. Or at least, I’d like to think so *gulp*. On doing some research on why people don’t save, I came across an article on the Financial Consumer Agency of Canada’s (FCAC) website. Now I don’t know if these are actual quotations from real people, but most of the reasons/comments they list, reflect the very long term – “We don’t always know what we will want in the future” or concerns that frankly, should be less important like “where to put it”.
But the future isn’t only about retirement planning and things twenty years down the road. The future could be 5-6 months from now or even tomorrow. Yes, long-term goals are very important, but the short-term goals are almost more important. As cliché as it sounds, what you do today, can help to put you in a better position tomorrow.
And I see how all this talk about saving for goals, can scare a lot away. I mean, chances are, if you’ve been on any type of job interview, you’ve been asked a similar question like this at least once: Where do you see yourself? in 5 years? 10?. It’s an important question to ask, but it’s such a BIG question. Now if you give me specific questions of what I want or what I want to accomplish this year, I could give you a laundry list.
How will you get there?
Here are 4 simple steps to follow:
Make a list of all of your ‘wants‘. What are you saving up for this year or two years down the road? Give them a date and prioritize your list by date. Is the goal and timeline you set, realistic?
Ask yourself, “what will it cost?” Do your research and list the prices next to each item. Yes, there’s plenty of ways to bring down the prices of things (unless your saving for an emergency fund), but if you budget for the most you think you will spend, then hey, the extra is just icing on the cake!
Budget for your ‘wants‘. Now that you’ve listed your wants and how long it will take to reach each goal, include them as part of your budget. Always budget your needs first (food, shelter, etc.) then your wants. You might need to go back and tweak timelines if you can’t fit it in. If you still can’t seem to make room for your wants, you have really three options: 1) expand the amount of time you will take to achieve your savings goal. 2) reduce other expenses, so you can have your cake and eat it too. What’s with all the cake talk, anyways? I must be hungry or something. 3) find some other source of income.
We have set up separate savings accounts for each of our big goals. Right now, one of our big goals is saving up for a newer car. Both of our cars are on their last legs (or wheels), both are over 12 years old now and I just know one of them will probably go any day. Better safe than sorry. But if all you want in life is a Big Mac or a double cappuccino, then head on over to my previous post Fun money: budgeting for the fun stuff.