Saving money is the first step towards building a strong and stable financial future. However, most of us find it challenging to set aside funds monthly without a real end goal. That’s why financial experts recommend setting savings goals. Savings goals act as milestones on your saving and investment journey, keeping you motivated to save consistently. Saving goals can be many and varied, including saving for a vacation, buying a car, making a home loan down payment, or simply preparing for retirement. Once you know your specific goals, you can invest in various vehicles like tax-saving fixed deposits, mutual funds, bonds, and stocks to grow your savings and achieve your goals.
How to set savings goals
Reaching savings goals is easy once you develop a system to quantify and track them. Here is a list of tips you can use to set your savings goals and achieve them faster:
- State a realistic goal: Decide on a realistic amount you wish to save. Assess your current income and expenses to arrive at the savings amount. You can also use a savings calculator or budgeting apps to determine how much you can realistically save in a month.
- Choose the right savings account: Selecting the right savings account can help you reach your savings goals faster. Compare savings account interest rates offered by banks and choose a high-yield savings account to watch your funds grow over time.
- Set a deadline: Set a timeline to achieve your savings goals. For instance, you may want to save to buy a car next year or invest in retirement planning to retire by the time you turn 55. Setting deadlines for short and long-term goals is crucial since these deadlines help keep you motivated to save and make tracking progress easier. Additionally, they help you estimate how much you need to save within the given timeframe to achieve the goal.
- Track your goals: Review your bank account statements every month to confirm if you have saved the planned amount. Since manual tracking can be tedious and time-consuming, you can create a spreadsheet with different expense and savings categories. You can also use budgeting apps for efficient savings management. These apps auto-track your progress and provide notifications for key milestones, like reaching 25% or 50% of your savings goals.
- Adjust your goals whenever needed: Your savings goals are not set in stone. Life’s unpredictability can cause your savings goals to change over time. For instance, your savings rate may change after a promotion or may decline during a period of unemployment. In other words, remember to adjust your savings goals and timelines as life unfolds.
What is a good savings goal
When it comes to a good savings goal, there is no one-size-fits-all solution. Your ideal savings rate depends entirely on your financial circumstances, lifestyle, and financial goals. That said, experts suggest dedicating at least 20% of your monthly income to savings. This can help you build an emergency fund, cover unexpected expenses, and save for long-term financial goals like retirement. You can park these saved funds in a national savings scheme to enjoy assured returns, capital safety, and tax benefits. While you can save more, saving less than 20% will mean longer timelines for goal fulfilment. However, at the end of the day, how much you can save depends on your expenses and income thresholds.
What are the different kinds of savings goals
Short-term goals: Typically, short-term goals are smaller goals that can be achieved within a year, like saving for a vacation or buying a new smartphone. These goals have shorter timelines since they require smaller amounts of savings.
Medium-term goals: Medium-term goals lie in between short-term and long-term goals. Generally, these goals can be achieved within one to five years. Saving for a new car or making a down payment on a house are two examples.
Long-term goals: Long-term goals require substantial savings over a time period of more than 5 years. Saving for your child’s college and preparing for retirement are some of the most common long-term savings goals.
How to reach your savings goals
Reaching your savings goals becomes easy when you have a well-defined plan in place. Here are a few tips to help you reach your savings goals systematically:
- Check your budget: Assess your budget to find out how much you can realistically save given your fixed expenses like rent, food, utilities, etc. Regularly assess your budget to identify redundant or unnecessary expenses. Cut back on such expenses and direct the saved funds towards your savings goals.
- Create a savings schedule: Inculcate a disciplined approach to regularly contribute to your savings account. Automate savings to ensure a certain portion of your monthly income goes directly towards your savings goals.
- Monitor your progress: Keep a vigilant eye on your savings progress. Review monthly savings to see if you meet the 20% savings benchmark. Download a budgeting app on your phone to help manage and track your savings.
- Adjust your goals: Give yourself the flexibility to adjust savings goals and timelines based on life’s circumstances.
- Make sound investments: Invest wisely to grow your savings corpus with the power of compounding. Choose from high risk-high return investments like equity stocks, mutual funds, and EFTs, or low-risk-moderate return investments like fixed deposits, NPS, and PPF. Carefully evaluate your risk appetite and investment horizon before choosing an investment vehicle.
How long does it take to reach a savings goal
The time it takes to reach a savings goal varies from person to person. It entirely depends on the amount of money you can set aside and save monthly and the nature of the goal. For instance, fulfilling a long-term goal like retirement will take years of saving, while reaching a short-term goal like buying a two-wheeler can take about a year. Apart from your saving potential and goal type, timeframes also depend on the type of investment vehicle you pick to grow your saved funds. For instance, investing in Post Office Tax Saving Schemes can help boost your savings with tax-efficient and stable returns. However, investing in market-linked investments like mutual funds with a higher yield potential can help shorten the time needed to reach some of your savings goals.
Bottom line
Setting savings goals is crucial to having ample funds for the things you want or need. You can start by deciding what you need the money for, when you would need it, and how much you should save monthly. With defined savings goals, you can stay motivated and save in a disciplined way to transform your goals into tangible realities.
FDs are one of the best ways to grow your savings corpus. A Bajaj Finance FD offers flexible tenures to help you meet various types of short-, medium- and long-term savings goals. So, whether you want to save for a vacation or as a part of retirement planning, you can pick a tenure of your preference. Additionally, with interest rates of up to 8.65% p.a., Bajaj Finance FDs help grow your savings corpus at an accelerated pace, bringing you closer to your savings goals!
