VOL. 128 | NO. 7 | Thursday, January 10, 2013
Rays of Wisdom
Dana and Ray Brandon
Set Goals to Make Saving Easier
By Ray and Dana Brandon
Ray’s Take I’m always emphasizing the importance of saving. However, saving without specific goals in mind with their time horizons is extremely hard to do. There are just too many distractions in this world – too many well-trained marketers with different agendas. Goal setting is an essential step in the planning process. It’s the primary motivating factor. After all, if you haven’t identified any goals, what’s driving you to save? Just as important, how do you know when you’ve saved enough?
Goals also give you a sense of progress. As your savings grow you can see how much closer you are to reaching them. They also help you make everyday lifestyle decisions that help you achieve them: do you want to go to that movie or save toward a new computer? Is a night on the town more important than getting closer to buying a new car? Without stated savings goals, you miss much of the motivation to forego instant pleasure.
It’s best to set both short- and long-term goals. Short-term goals should be reachable in a year or two. That way you can enjoy the benefits of responsible saving along the way. Short-term goals could be a new TV, vacation or appliance. Long-term goals could include a home, retirement or college for the kids.
With your life partner, draw up a list of goals, divide them into short and long-term and then prioritize. Determine a timetable for achieving your goals. If that TV you want is $600 and you want it in five months, you need to save $150 a month. To determine what rate you need to save at to achieve more expensive, long-term goals, it helps to consult a financial adviser who can help you factor investment growth and inflation adjustments into your savings plan.
Once you’ve set your goals, keep your list handy for easy reference. When your savings goals are top of mind, it’s far easier – and more rewarding – to save.
Dana’s Take In his memoir “Angela’s Ashes,” author Frank McCourt describes his mother’s household goals. Their family was desperately poor and a long-term goal was to actually have sheets for the family bed. Certainly puts things into perspective, doesn’t it?
When savings goals seem unattainable, perhaps it means that our goals are too grand or undefined.
Start with a concrete and achievable number at first, like saving the equivalent of one month’s living expenses in an emergency fund. At the outset, secure the support of all family members and perhaps assign a portion of the goal to each family member. Otherwise, a splurge can destroy savings progress and set up a vicious blame game. Gradually build that fund until it reaches six months of living expenses.
It’s a new year and a great time to start the family on a savings goal. Focus on successes along the way and start the savings habit.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at email@example.com.