How to Find Balance With Your Savings Goals

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how to balance multiple savings goalsDo you have multiple savings goals?
One of the most effective ways to save money is by creating savings goals. This gives you a defined reason why you are saving for something, instead of just throwing money into a pot and pulling it out whenever you “want something.” If you want to take it a step further, you can create a…

One of the most effective ways to save money is by creating savings goals. This gives you a defined reason why you are saving for something, instead of just throwing money into a pot and pulling it out whenever you “want something.” If you want to take it a step further, you can create a sinking fund, or a unique sub-account for your savings goal. This is easy to do at many online banks, including Capital One 360 and Ally Bank.

Sub accounts make it easier to balance multiple savings goals, but they also make it easier to spread your money out too far if you aren’t careful. When you are trying to save for multiple things all from the same paycheck, you can end up allocating so much cash to your goals, you have little life over for day to day living. While it is good to have savings plans in effect, it is also very crucial that you find a balance for each of your goals. Otherwise you may end up financially strapped in one area and find you have to take from one account to make up for another deficiency, essentially destroying your entire plan.

how to balance multiple savings goals
Do you have multiple savings goals?

So how can you keep things in balance? It’s not difficult but does require some forethought and continuous effort. Here are some tips for finding a balance in savings goals:

Make a List of Your Top Savings Goals

Start by making a list of what you want to save for and define your goals (why you want/need to save). If you are like most people, you probably have multiple areas where you want to save. These often include categories like retirement savings, an emergency fund, college savings plans, vacations, home improvements, and big ticket purchases like a new car. These can be a start to your list, depending on what your goals and needs are.

Prioritize Your List

Once you have established a list, you may find that you do not have enough income to sustain all of these goals – at least right now. The next step is to prioritize the categories in order of importance for you and your financial needs. Establish the priority of each item makes it easier to split your allocations accordingly and better track your progress.

Work These into Your Budget

Hopefully you already have an established a budget. This makes it easier to determine just how much money you have left to put towards your goals each month on a consistent basis. If you don’t already have a budget, then take the time to gather your income statements and your bills. Even if you don’t budget to the penny, this will help you have a better understanding of your net income and expenses and give you a better idea of how realistic your savings goals are, and how long it might take to achieve your financial goals.

Break Your Goals into Bite Size Chunks

Each goal can be broken into a small piece to make it easier to achieve. For instance, you may find it difficult to write a $5,500 check if your goal is to max out your IRA each year. But you may be able to max out your contribution each year by making monthly contributions. Start with the $5,500 annual goal, then divide by 12, which gives you $458.33 per month (max limit for a single investor under age 50 – see this link for all IRA contribution limits).

Another good short term example would be a large purchase (say a new refrigerator) that costs $1000. You’d like to purchase the refrigerator within the next six months. Dividing the $1000 by 6 months, you would need to set aside roughly $170 a month or about $43 a week to achieve your goal.

It may be more difficult to establish the longer term goals such as those for retirement, since there are many unknown factors. But as time goes on and your income increases, you can gain more perspective about how much you need to save to achieve goals for the future. Short term goals may be easier to figure out. You can start with an emergency fund if you can’t afford multiple kinds of savings plans. Try to save up 6-12 months of living expenses to get going.

Apply These Changes to Your Budget

Your savings plan needs constant care and upgrading much like your budget. If you consistently work towards fine-tuning your goals and distributions of monies, you will likely achieve success financially with all of your goals. Goals will also change in priority depending on daily life and financial needs so keep up with your plan and keep it active.

Supercharge Your Progress By Decreasing Debt and Increasing Your Income

You can achieve your savings goals more quickly by some combination of decreasing your debt (and eliminating monthly debt payments), and/or increasing your income, which gives you more money for your savings goals each month.

Debt Reduction

Debt is an ugly beast which can be incredibly difficult to slay – especially credit card debt, which can have interest rates over 30%. If you only make the minimum credit card payment, it will take you years to pay your debt. Here is how you can reduce your debt:

Analyze your situation. Make a list of all your sources of income and all your obligations. Then use this information to create a budget.

Stop generating new debt. Doubling your payments doesn’t do much good if you continue to add new debt. Cut up your credit cards and stop spending more than you earn.

Accelerate your debt payments. After you have a budget in place and you stop creating new debt by spending beyond your means, increase your debt payments to eliminate your debt more quickly. There are several ways to do this, but one of the most effective and most popular ways is the debt snowball, which was made popular by Dave Ramsey. To create a debt snowball you take extra money you earn and put it toward your debt. When you pay off one debt, continue using that money each month to pay other debts. Your debt payments will get larger over time which will eliminate your debt more quickly than if you were to pay only the minimums.

Earn More Money – Small Increases Can Have a Huge Impact

Your ability to create income is your greatest asset, and because of this, you need to not only take care of it, you need to grow it! Why do you need to earn more money? Many reasons… How about debt repayment, keeping up with inflation, investing, saving for retirement, taking a vacation, no longer living paycheck to paycheck… need I go on?

OK, we know that earning more money is never a bad thing, but it is sometimes easier said than done. Here are a couple ways you can earn more money. Keep in mind, they may take some time and there is work involved, but anything worth having is worth working for.

Earn more money through your day job. Chances are most, if not all, of your income comes from your day job. That means you need to work to maintain your current income, and strive to improve it if possible.

  • Ask for a raise. One of the best ways to get a raise is to simply ask for it. Make sure you do it the right way and go in prepared – have a list of accomplishments including how much money you earned for the company or saved the company.
  • Professional certifications. Obtaining a professional certification can lead to increased income. Research which certifications are the best in your field and go after them.
  • Change jobs. Sometimes the best way to get a raise is to go to another company. Consider it a bonus if your company pays for it.

Earn money through alternative income streams. I define alternative income as any money earned outside your normal day job. There a hundreds of ways to earn money outside of your normal routine, and earning a little side income can help you reach your financial goals more quickly and act as an insurance policy against losing your job or another main source of income.

Some ideas for alternative income include starting a side business, consulting, working a part time job, owning a rental property, owning dividend paying stocks and other investment income, working a part time or seasonal job, owning patents or receiving royalties, buying and selling items on Craigslist, Ebay, etc. With alternative income, you can use creative ways to generate more money. The limits are up to you and your imagination.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Ryan says

    Melissa: I think that all depends on the situation at hand. Many people are high performers and are extremely profitable for their company or they have a specialized skill. Many companies would much rather give a worker a raise than allow a skilled or profitable worker go to a competitor.

  2. greg group says

    This is a great article. I like to focus more on the income side while keeping my debt level stable. This creates more incremental income that allows me to build more future income streams. Thanks for sharing.

  3. Crystal @ Prairie Ecothrifter says

    I love ING subaccounts. We have 8 of them. Granted, we are sort of combining most of them and using them all up for the downpayment on a new home right now, but after that, we’ll be building towards our separate goals again.

    • Ryan Guina says

      they are very convenient. I used one for my daughter’s first savings account, until I opened her own. 🙂

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