How to Save for your Short-Term Financial Goals?
Short term goals can be achieved in under a year. To determine the amount, you will need to save for whatever good, service or situation, look at what the cost is now – it is unlikely that the price will be that much different in the next seven to eight months down the road. Once you know the total amount you need, determining how much you need to save each month becomes easy – just subtract any amount you have already saved from the total cost and divide by the months until the desired achievement date.
You would like to buy a new sofa nine months from now. You visit a few furniture stores and discover that the model you are interested in cost about $900. You have not saved anything yet. Therefore, you would want to save ($900 – $0)/9 = $100 a month.
You would like to establish an emergency savings account within eight months. Unlike with the sofa, you can’t go to the store to determine how much you need. Instead, you want to look at what your expenses are – most experts recommend setting aside 3 to 6 months’ worth of essential livings expenses. You calculate your essential expenses at $1,000 a month. You would like to have 5 months’ worth of expenses in your emergency savings account and already have $1,000 in there. Therefore, you would want to save ($1,000 x 5 – $1,000)/8 = $500 a month.
Check out our Budget Analyzer Calculator to help determine your monthly spending habits. Want to take things a step further? Play around with our becoming a millionaire calculator to see how much you’d need to save each year to have a million dollars by whatever time you plan for.