Now that you have your budget and the ability to forecast it out over a span of time, the next element to add are the goals you’re working towards. These goals are anything you want to do that will require money to get there. Instead of trying to pay for something all at once, let’s take the preemptive step to start saving as early as possible.
1) Plan ahead. Start thinking of what the next year (or more) will hold in store for you. Is there a trip you want to go on in six months? Are you thinking of remodeling part of your house in a year? Or upgrading to a new appliance? Write down everything outside of the normal month-to-month budget that you should start planning for now.
2) Break down the costs. Estimate how much you need to save and how much time you have to save it in. Break it down by paycheck and look at your budget (and forecast) to see if you have the extra cash flow to devote to it.
For example, suppose I plan to take a trip in six months and estimate that I will need $2,000 all-in. Given that I get paid 2x a month, I know that I have 12 paychecks in which I can spread saving up the $2,000. This means I will need to save about $167/paycheck in order to meet that target. Adjust this as necessary for your needs.
3) Integrate into your forecast. Build or adjust your forecast with these plans in mind. This will help serve as a reminder to allocate dollars towards these categories as you budget your money. It will also show you how feasible these allocations will be and whether something should be pushed back (or even pulled forward).
4) Re-evaluate. As time goes on, have periodic check-ins to ensure you’re still on track. If new information comes in that affects how much you need saved or how long you have to save it in, make the adjustment to your goal, your forecast, and your budgeting allocations. Decide how feasible it is and go from there.
5) Be creative. Maybe you aren’t sure yet when you want to do something or how much you will need. In that case, set up some categories that you allocate a certain amount to each paycheck. Two that I use are “Vacation” and “Replacements”. Every paycheck I set a certain amount into both of these so that if something happens (a spontaneous trip comes up or my computer decides to die), I have the money set aside already. In a way, the “Replacements” category is part of the emergency savings that I build up – just in a more defined way.
6) Beyond expenses. You can also use this for things beyond your typical expenses. As an example, you can set goals and follow the same steps for how much you want to invest!
The primary objective of goal setting in this way is to be able to roll with things as they come in. It’s intentional saving because you know what the money is being saved for. Next time, I will go through how this saving can be used alongside your emergency savings to give every dollar a job in there as well.