Where Do You Find the Money to Achieve a Financial Goal?
by Scott Hannah
Q: I set a goal to save up $3,000 by the end of the year and get away to somewhere warm next January. After 3 months I have only managed to save $500. By the time I pay my bills and set some funds aside for spending there isn’t a lot left over to save. I’m single and while rent is expensive in Vancouver, I make a reasonable salary and should be able to accomplish this goal. I’m so frustrated, what am I doing wrong? ~Manjit
A: The fact that you have managed to save some money tells me that you are serious about wanting to achieve your goal. Without knowing the changes you have made in your expenses or how you are managing your money it’s difficult to pinpoint the problem(s).
Make Your Goal a Priority
What I can see from what you have shared with me is that your monthly expenses, bills and funds for spending come before setting funds aside for saving. If you’re serious about achieving your financial goal it has to be at the top of your paycheque priorities, not at the bottom.
Does Your Financial Situation Allow for This Goal?
The other consideration is whether or not your goal is realistic given your current financial situation. Before outlining strategies to get your savings back on track, you will need to determine if you can set aside an average of $278 per month from your monthly income in order to reach your savings goal of $3,000 by the end of this year.
How to Determine if Your Money Goal is Realistic
Accurately identifying all of your monthly and annual/seasonal expenses is a critical step to determining if you have the ability to fit your goal within your income. Reviewing your online bank statement is a good place to start to gather this information, along with any expenses that were paid with a credit card.
An Expense Tracker Will Help Identify Irregular Expenses
In addition to this you will need to set aside a portion of your paycheque each month to cover the cost of seasonal and annual expenses like insurance, clothing and Christmas. Don’t forget to include payments you are required to pay for any outstanding credit card balances or loans.
If you are unable to identify all of your expenses it may be necessary to use a notebook or an expense tracker to record all of your regular and irregular expenses. With this information on hand, the next step in the process is setting up a budget that will help you determine if you are living within your means and have the ability to achieve your goal.
Setting Up a Workable Budget
I’ve written a lot about budgeting over the years and knowing how to manage money makes achieving financial goals much easier. Instead of going into detail in this article, here are two links that outline the budgeting process in a straightforward way:
- 7 Steps to a Budget that Works – this is our very popular 7-step process to help everyone create a budget that works on any income
- Interactive Budget Calculator Spreadsheet – get help in real-time juggling the numbers to make your budget balance
What to Do to Get a Balanced Budget
With your budget established, using accurate expense information you’ll be able to see if your financial goal fits within your income or not. In all likelihood your expenses and savings goal of $278 will leave your budget in a deficit position. This is fairly common as most of us don’t have a lot of spare cash lying around after paying our bills. To balance your income and expenses you will need to decide what changes you are prepared to make in your spending in order to achieve your goal.
Make Small Changes to Find the Money to Achieve Your Goal
Instead of thinking that you have to find $278 each month in order to achieve your year-end goal, look at it from the perspective that you need to make a number of $5 – $25 spending decisions to achieve your goal. Modifying your daily, weekly or monthly spending in a number of different areas is also a lot easier than making wholesale changes in your budget. For example, giving yourself a set allowance each week for spending and living within could easily save you $15 a week or $780 over the course of the year.
Related: Practical Ways to Spend Less and Find Money to Save
Review All of Your Expenses & Services to See How You Can Save
I encourage you to review all of your expenses in detail to determine if you are getting good value for your hard earned money. Even if you think you are getting good value it doesn’t hurt to shop around for a lower price. It’s a lot easier to do this today as information is readily available online and it also doesn’t hurt to ask the places where you currently buy from if they can give you a better deal.
Decrease Expenses….And Increase Your Income
If you have the opportunity to earn overtime pay at your place of work or receive money at different times of the year like a bonus, tax refund or when you receive an increase in pay, bank this money in your savings to meet your savings goal sooner.
Tips to Keep Your Savings Goal on Track & Fight the Urge to Spend Impulsively
With your budget balanced and the monthly money found to reach your goal, the challenge is staying on track and protecting your savings from impulse spending. It’s easy to justify using some of your savings if you are caught with an unexpected expense or feel the pressure to join some friends for a night out with the thought that you will make it up later. The problem with this line of thinking is that later never comes and your once solid savings plan will be put in jeopardy.
Automate Your Savings
To minimize this from happening ask your financial institution to set up an automatic transfer from your main bank account to a separate savings account each time you get paid. Having the money come off the top of your paycheque will also get you in the habit of living on what’s left instead of scrambling to come up with the money for savings. Lastly, do not connect your debit card with your savings account. This will help protect your savings from impulse spending and keep your goal on track.
The Bottom Line on Saving for a Financial Goal
Saving towards a goal is an important step in building effective money skills. I encourage you to keep working towards getting the most out of your money. Keep in mind that the difference between people who are successful in reaching their financial goals and those who struggle is realizing that it’s not about how much you earn; it’s what you do with the money that counts.
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