6 Oct 2023
Saving money is an essential aspect of personal finance. However, it can be challenging to save money consistently and effectively. Many people struggle with setting saving goals and taking the necessary steps to achieve them.
In this blog, we will discuss:
The importance of saving goals
Examples of saving goals
How to set (multiple) saving goals for yourself
Actionable tips to save more money
Why set savings goals?
Setting saving goals is important for two reasons:
It gives you a clear target to work towards. When you have a specific goal in mind, you are more likely to stay motivated and disciplined.
Setting saving goals can help you prioritize your spending. When you have a goal in mind, you can evaluate your spending habits and determine where you need to make adjustments to reach your goal.
Examples of savings goals
🧳 Travel: If you love to travel, setting a saving goal for your next trip can help make it a reality
🏠 Buying a house: If you want to buy a house, you have to pay for certain costs yourself (notary, taxes, broker fees) and potentially make a down payment— as you might not be able to buy the house with just a mortgage. Read this blog about buying a house and the associated costs.
🏠 Home renovation: If you’re a homeowner, you may have home renovation goals, such as remodeling your kitchen or expanding your living room. This can help you achieve the home of your dreams.
👴 Pension: Saving for retirement is important to ensure financial security in your golden years.
💍 Wedding: Weddings can be expensive, but saving money towards your big day can help make it more affordable
📚 Education: Whether you are saving for your own education or for your child’s, setting a saving goal for education can help alleviate the burden of the high costs or student loans
🚗 Car purchase: If you need a new car, setting a saving goal can help you avoid high-interest loans.
💳 Debt payoff: If you have debt, setting a saving goal for debt payoff can help you become debt-free faster, giving you more financial freedom.
Example: setting a saving goal for a vacation
Let’s say your saving goal is to take a vacation in 1 year that will cost €3,000. Here’s how you can calculate how much you need to set aside each month:
Determine the time frame in terms of months: You want to save for something in 1 year, so your time frame is 12 months.
Calculate the total amount needed: €3,000
Divide the total amount by the number of months: €3,000 ÷ 12 = €250
So, to achieve your saving goal of €3,000 for a vacation in 1 year, you would need to set aside €250 each month for 12 months.
What to do if you have several saving goals at the same time?
Let’s say you have three different saving goals at the same time:
You want to save €1,000 for a new laptop in 6 months
You want to save €3,000 for a vacation in 1 year
You want to save €20,000 for the costs related to buying on a house in 3 years
To achieve your laptop goal, you might need to save €167 per month for the next six months. For your vacation goal, you might need to save around €250 per month for the next 12 months. For your long-term goal, you might need to save €555 per month for the next 3 years.
It’s important to prioritize these goals and adjust your savings plan accordingly. For example, you might prioritize your laptop goal by setting aside a larger percentage of your income in the first six months, and then adjust your savings plan for your vacation and home buying goals accordingly.
💡 Tip: Creating multiple savings accounts can help you track your progress towards each goal and avoid dipping into savings earmarked for a different goal. Some bank apps also provide the ability to allocate your savings in your savings account to different goals.
By regularly revisiting your goals and adjusting your plan as necessary, you can work towards achieving each of your savings objectives over time.
Actionable tips to help you save more money and make reaching your goals easier
📒 Create a budget
Track your expenses: Start by tracking your expenses for a few weeks or a month to get an accurate picture of where your money is going. You can use a spreadsheet or a budgeting app to help you. Your bank app likely has this functionality, or otherwise try an app like Dyme.
Categorize your expenses: Once you know where your money is going, categorize your expenses into essentials (like rent or mortgage costs, groceries, and utilities) and non-essentials (like eating out, shopping, and entertainment).
Identify areas to cut back: Look for areas where you can cut back on non-essential spending. For example, you might decide to cook at home more often, cancel a subscription you don’t use, or switch to a cheaper cell phone plan. If you would like to get personalized help with this, speak to one of Equip's budget coaches. Get your free Equip account now, sponsored by Rituals!
Stay mindful of your spending: When you’re out and about, be mindful of your spending. Think twice before making impulse purchases, and ask yourself if you really need the item.
Use coupons and deals: Look for coupons and deals on items you need to buy. This can save you money and help you stay on track with your savings goals. For example: shampoo, cosmetics and other toiletries often have regular steep discounts — build up a stock of them when you can buy them on the cheap!
⏫ Increase your income
Take on a side gig: Consider taking on a side gig to increase your income. This could be anything from freelancing to babysitting.
Sell items you don’t need: Look for items around your home that you no longer need and sell them. You can use online marketplaces like Marktplaats or Facebook Marketplace to sell your items.
⚙️ Automate your savings
Set up an automatic transfer: Set up an automatic transfer of a certain amount of money into a separate savings account each month. This can help you stay on track with your savings goals and make saving money more of a habit.