There are many reasons to save your money. You may be saving for a short-term goal such as a taking a vacation or throwing a party. Or you may have your sights set on something bigger, such as a new home or preparing for retirement. Whether your goal is big or small, the most important step is having a plan to reach your savings goal. However, as we all know, setting your goals and making a plan is the easy part – sticking to that savings plan is the challenge.
Michael Liersch, Head of Advice and Planning at Wells Fargo, provides tips on how to create a savings plan that will stick.
Start small: Set small, achievable and specific goals for yourself. If your goals are too lofty, it is harder to track progress and stick with it. For example, start small by setting aside $10 per week to put into your savings account and over time as you are hitting your goals consider increasing that amount. This $10 per week will accumulate to $40 per month – seeing your savings grow will inspire you to keep going.
Get out of your head. Liersch believes that when money goals are all in your head, it can all seem too big, broad, and scary to properly conceptualize. “Behavioral science shows that feeling overwhelmed can cause human beings to be inert or do nothing. To get past that inertia, people need to take all that stuff out of their minds and start to record it either on paper or in a favorite goal tracking capability in bite-sized chunks.” He suggests one option for goal tracking is LifeSync, WellsFargo latest addition to their mobile app. This enables you to name your goals, upload inspiring pictures, connect your money to your goals, and track progress. Whether it’s on paper, in an app or on a custom spreadsheet – keeping a record to track your progress will help you reach those goals and stay accountable.
Don’t go it alone. Another great way to stick with your goals is to set saving goals with someone else. About half (46%) of Americans in a recent Wells Fargo Money Study said that their family has helped them improve their approach to money. So getting that trusted family member, friend or professional to hold you accountable and celebrate your wins with you goes a long way.
Reward yourself: When identifying saving goals, Liersch says people tend to emphasize all the things they shouldn’t or can no longer do. According to the study, 43% said that they had a “scarcity” mindset when it came to money. And 60% admitted to over focusing on how much money they have or don’t have. “These feelings of, and focus on, restriction and deprivation can cause you to give up on your savings goals – and ironically make even more dramatic swings toward negative financial behaviors because they feel that it’s out of their control.” Instead, he suggests to focus on being intentional with how you are allocating your money, this includes putting money towards your savings goals while still spending on things that bring you joy. For example, every time you meet your monthly savings goal, maybe take $5-$10 out and go get your favorite takeout burrito. Do something to celebrate the fact that you’ve accomplished what you set your intentions towards. Similar to extreme dieting – in the long run endless constraint will often result in spurts of overspending, while making the choice to treat yourself responsibly will help you learn to celebrate the small wins.
Prioritize Your Goals: Between retirement, buying a home, and day-to-day expenses, inertia can also come from not being able to choose which goal to save towards. When it comes to goal prioritization, only 13% of participants in the Wells Fargo Money Study said they were extremely clear on how they were going to achieve their financial goals. Liersch recommends starting by naming and describing each goals, and exactly what they mean to you. This can help you prioritize what’s most important. From there, you can plan out exactly how much is needed for each goal and the time line to accomplish them. Finally, he suggests where possible, give even lower priority goals some regular and consistent attention. “Let’s get real… retirement is important, but we all have day-to-day expenses like rent, food, utilities, maintenance and more. So goals like managing spending, managing credit and debt, saving for emergencies or near-term purchases naturally come first.” He recommends figuring out the amount of money you need to dedicate to your essential goals. Then, with what’s left over, try to dedicate even tiny dollar amounts to your more discretionary, less time-sensitive goals. He says it important to do this with regularity and consistency to keep your goals top of mind, help you make at least some progress, and also keep you focused and intentional.
Saving for goals, especially large or long-term ones can feel overwhelming. But if you start small, stay accountable, set rewards and prioritize you can create a savings plan that is manageable, realistic and long lasting.
