Tuesday, December 13, 2011

Can't Save? Try Prioritizing Your Goals

Most people, including myself, find it very hard to save money day in and day out.  It's difficult to not want that awesome iPad 2, or those oh-so-soft bath towels, or that cute pair of shoes.  If you don't take a moment to come down from that shopping high and really think about what you're doing, you will have that item paid for and on it's way to your house quicker than you can say, "Zoiks!"

Don't get me wrong.  It is okay to splurge and buy yourself or your family something...on occasion.  You should enjoy that money you work so hard for.  But hopefully these splurges are more of a planned event with saved funds and a budget, rather than an impulse buy.  I think the problem for so many is that we tend to get lost in our interpretation of 'enjoying our money'.  We have a lifestyle that we want to support, for whatever the reason, even if we can't afford it.  Or we just get lazy.  Too tired to cook tonight, so let's order pizza.  Don't want to drive to my own bank's ATM down the street, so I'll just use this one right here and pay $5 in fees.

Yes, I enjoy spending money on eating out and shopping and vacations, but I enjoy even more being able to pay my bills and mortgage on time and having a savings account that can get us out of a jam or keep us afloat if needed.  Financial security is far more desirable to me than that sexy Macbook.

I find that if I direct my focus towards the big picture and think about want I really want for myself and my family, it helps me to avoid unnecessary spending.  Personally, my goal is financial security in the form of well-stocked savings and retirement accounts.  Our life experience over the recent years (i.e. Hubby's layoff) is what caused us to shift our focus to savings, rather than debt repayment and retirement accounts.  Though smaller than we would have hoped, our savings account was a great thing to have during that period to fall back on.  Slowly but surely we are catching back up, working towards having 6-8 months of expenses saved, then we will shift our focus to other things.

Many people find saving difficult because it seems like a huge task, a long term commitment.  Where to start? How much should I save? What about my debt?  If you happen to be one of those people who want to avoid spending and focus on saving, but always seem to fall short, start with PRIORITIZING YOUR GOALS.  Your priorities will be different from mine, and someone else's will be completely different from yours.  These will depend on your individual situation, career, goals, life experiences, and tolerance for risk.  For example, someone who is single with a steady career, who rents a small apartment, and has no debt will prioritize things much differently than a married couple with children, who receive small salaries, and have medical problems.

Decide what financial goals are most important to you and your family for both the short and long term.  It could be building your emergency fund to cover one year of expenses, paying off debt, increasing or maxing out your retirement contributions, saving to replace a car/appliance/furnace that's about to die, saving for kids' college, starting to invest, building a dream home...You want to arrange these goals to put you in the best financial position as quickly as possible while keeping in mind your tolerance for risk.  For instance, if you only have $500 in your emergency fund, and your car is getting up there in mileage and starting to need lots of repairs, it would be wise to concentrate on building your savings to a comfortable level in case of a huge repair bill in the near future, rather than clean out your emergency fund to pay down a credit card.  Just sayin'...

Do whatever necessary to eliminate those temptations and keep you moving towards those goals.  Change your commute to avoid traveling past the coffee shops, book stores, and malls.  Tape a picture of your child/spouse/dream house to your wallet so you see it whenever your tempted to spend money.  Keep snacks and drinks in your car to avoid the fast food stops.  Don't browse the Sunday newspaper sale ads.  And for heaven's sake, don't go shopping when you're bored!

Your budget may only allow you to work on one goal at a time and that's okay.  The important thing is that you start.  Do it.  NOW.

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