How to Set Spending Goals

What’s the difference between a goal and a dream? Goals are attainable targets you can reach by working hard, saving money and setting realistic expectations. If you’re just starting to think about the future, you may feel overwhelmed by the number of things you want and how much they cost. That’s why it’s important to break your goals down into a few categories. Financial goals should be:

1. Specific

Before you start to save, determine exactly what you want, when you want it, and how much it will cost.

You might want to purchase a home near the beach. If that’s the case, you should decide… which beach? How many bedrooms will you need? Will you need a travel budget to get there? All of these specific considerations add to the cost of this dream property. The clearer your goal is, the more realistically you can save.

2. Measured by time

Categorize your goals on the basis of how long it will take you to accomplish them.

Below is a breakdown of how that might look:

• Short-term financial goals: achievable in under 1 year. Perhaps this is a small kitchen upgrade or a vacation.
• Mid-term goals: achievable in 1-5 years. An expensive trip to Europe or an addition to your home may fall under this category.
• Long-term goals: achievable in 5+ years. These can include your big-picture retirement plan or a larger, more expensive house.

3. Prioritized

If you have multiple goals, you may choose to work toward them all at once or concentrate on one at a time. Some of these goals, like paying for your child’s college education, are time-sensitive and highly important compared to luxury items like computer upgrades or a new car.

To help prioritize your goals use our Financial Goals Worksheet. Once you’ve prioritized your goals, here are some ways to calculate how they will impact your saving plan:

For short and mid-term goals, the calculation for how much you need to set aside each month is simple: the cost minus the amount you have saved so far, divided by the number of months you have to save.

For example, the tablet you want is $800, and you would like it in six months. You have not saved anything yet. To reach this goal, you will need to set aside $133 per month ($800/6 = $133).

A Bethpage savings account or Special Purpose account should do the job for these goals.

Long-term goals are a little more complicated because you can deposit your savings into an investment vehicle and earn interest like a Bethpage money market account, which will help you achieve your final savings goal. (You can do this for short-term goals too, but the interest earned is usually minimal.)

Whatever you are saving for will also likely cost more in the future because of inflation, or the gradual rise in the cost of goods and services over time.

You can use our financial calculator to figure out how much you should set aside each month for long-term goals. (Use your best estimate as to how much you will need to save and what your return will be.)

For example, your goal is to save $10,000 in 10 years for your child’s higher education. If the annual rate of return (interest) averages 2% you will need to set aside $75.34 each month.

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