With many financial obligations binding you and your family, it’s understandable that some plans and goals will need to be pushed back for others. Sometimes, it might seem intuitive to start with meeting the most urgent or frequent financial needs – like paying the bills and expenses that recently come up. After that, short-term saving goals like future big purchases may seem more obtainable and practical to save for than expenses that are further away.
But some long-term goals are important and should be prioritized, among them saving for an emergency fund, college and retirement. Just think what will you do when it’s time for you to send your child to college, or retire, or when a big unexpected expense suddenly comes up? It’s better to save yourself the stress and what-ifs simply by saving ahead and being ready for these major events.
That said, resource is limited to go around among these goals and expenses. How do you balance everyday spending, short-term and long-term savings?
- Only save for really necessary goals – These include the big long-term goals we mentioned above. Other goals can be considered and prioritized by asking yourself and discussing with your family: Do you really need to save for this? Is this something you need or something you want? Are there less expensive alternatives?
- Save for realistic goals – Don’t plan to have debt. If you think you will have to take out loans for a goal, you likely can’t afford it. Reconsider the goal’s priority and whether obtaining this goal will have more benefits than costs in the long term.
- Put long term into short term – After determining how much you will need to contribute to a long-term goal, divide the amount into yearly or monthly (recommended) installments. This way, combined with the short-term goals, you will know how much to set aside for savings each month.
- Save before spend – For every paycheck and income source, pay yourself first – set aside portion for established savings before setting a spending budget or even paying the bills. You can adjust how much to save according to financial obligations each month; the amount saved for each goal does not matter as long as you’re putting saving into them.
- Skim some expenses – Cook at home and save the family eat-out costs. Always look out for cheaper options. With a little effort and sometimes creativity, you can budget day-to-day spending with less and maybe even have extras to save more! (see our other saving tips)
Dividing your resources between frequent expenses, short-term and long-term savings can mean a longer time for you to reach each saving goal, but it also puts you closer to every goal.
How else do you balance your financial obligations?