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Manage Money: How to Set Financial Goals 

A favorite topic of discussion here at TGMC is how to help schools reach their financial goals. In fact, we have a Top 10 New Years Resolutions (2)pretty good average with 88% of our clients meeting, or exceeding, their fundraising goals!

A large part of managing money, whether for a PTO group or for your own finances, is learning how to set goals that are 1. Achievable and 2. Logical. For instance, a goal of saving $10 each week is more than reasonable for most of us, but does it make sense? Will it provide for what you need in the long run? 

We’re lucky to have learned what really works when it comes to setting financial goals and reaching them, and we time to savewant to share these best practices with you! 

The following tips are for individuals looking to better manage their money in the New Year. If you’re a PTO leader and want tips on setting financial goals for your next fundraiser, we have excellent guides in our Event Toolbox! Shoot us an email for a free tour and to learn more about these great resources. 

A Few Things to Keep in Mind...

Making a resolution to better manage your money and set achievable financial goals is great, but keep in mind that this is one commitment that will take time and follow through. Part of staying on track is making sure you take the tips we give you and amend them to fit your needs, budget, and personal goals. We have helped a ton of schools reach their goals, but we've also worked very closely with them to guide and advise them on their journey.

Since we can't hold your hand each step of the way, we want to make sure that you keep a few things in mind as you continue into this new year as smart money managers!

  • Consider getting a money coach/advisor – If you need someone who knows you and your money situation to help guide the way, consider hiring a money coach (can be a bit costly) or referring to a certified financial professional when you have questions/concerns.
  • Make these tips fit you, not the other way around – Make sure the tips you put into practice are made to fit you and your needs. Amend amounts, timelines and specific goals as you see fit, this way you are more likely to succeed and reach your money-saving goals!
  • Continue learning throughout the year – Books, podcasts, blog posts (including from yours truly!), and other resources are great materials to refer to when you need inspiration or guidance throughout the year on saving money.

How to Set Goals for Big PurchasesShopping

Ok, so what is it? A TV? Laptop? Car? House? Swimming pool and hot tub? Whatever big purchase that you've been dreaming about, just promise us that you will take your credit cards and lock them up or freeze them in blocks of ice before you're tempted to make an impulse buy. 

Big purchases are not off limits, by any means! But, we want to show you that saving wisely is a much better option than going out and getting that dream item right away. Don't believe us? Check out these facts & figures that might change your mind:

  • As of Dec. 2014, the average household consumer credit card debt was $15,611. 
  • That means, overall, Americans owed $882.6 billion dollars in credit card debt alone, not counting mortgages or student loans.

Part of lowering that number means that we all could do with a bit more saving and a bit less impulse purchasing with credit cards. 

Take the Time to Think about It

This may seem like the obvious first step to making a big purchase, but we also know how easy it is to get sucked into a sale without take the time to really think it over. So, to begin we suggest asking yourself the "because" question. "I need/want a new refridgerator because our old one is falling a part and leaking" or " I need/want a new car because my kids put pennies in the vent and now the heat won't work...plus it's old and smells like an ash tray."

These are fine reasons for purchasing a big item! But, if you ask the "because" question and can think of nothing else other than "because I want it" then maybe consider if there's anything else that is more deserving of your hard-earned money. 

Next, we recommend planning out what you want (in detail) rather than buying the first car/refridgerator/TV you see. This means laying out some criteria such as special features, color, size, and, of course, price. If you go into the it with a game plan, and stick with it, then you are much more likely to feel good about your purchase even after spending all that dough. 

Lastly, and if necessary, do a pros and cons list between some of the items you've picked out. If you're deciding between the cheaper mini van and the shiny new SUV, doing a pros and cons list may help you realize that what you need actually outweighs what you want (or vice versa!). 

So, to review, here's what to do before you even begin thinking about the money planning stage:

  1. Ask the "because" question
  2. Define your criteria
  3. Write out a pros and cons list between your options

Break It down into Achievable Parts

If you are purchasing an item that will require a loan or payments in monthly installments (like a car, boat, or big home appliance) then it is a great idea to break the price down into payable parts. First, make sure you have enough for the down payment (this means saving until you reach that amount, not dipping into your nest egg or emergency fund). Then, make sure you will have enough in the months to come to make that regular payment. This means going over what you earn and what expenses you regularly have, including bills and budgets for things like food, gas, clothes, etc.

save now If you have enough saved for the down payment and your income will support the monthly payments, then you can really consider the big purchase. If not, we advise you to either hold off and continue to save until it is feasible, or to consider an alternative (i.e., getting the cheaper car or the not-so-fancy washing machine & dryer). 

By the way, if you really are considering getting a car and you want help with figuring out an approximate monthly payment, Cars.com has a great calculator available for you to use.

Ease Yourself Into the Payments

Once you have calculated what you will need to pay each month, take the next few months to take that amount from each paycheck and put it into yout savings. This will basically kill two birds with one stone! First, it will allow you to save up for the down payment. Secondly, it will get you used to making that payment each month to pay off your loan. This gives you time to adjust your budget and your mentalitiy about having to make that monthly payment!

If you have decided that you aren't going to need a loan and that making the big purchase really just comes down to putting enough away until you can afford it, then we recommend using a similar tactic. Take the large amount that you will need to pay and break it down into monthly amounts. For instace, if you're going to be spending $10,000 on a used car and you already have $5,000 saved, take the next 3 months to put away approximately $500 each week into your savings account. But, the trick is to treat it like a bill, like something you have pay. In this way, you are less tempted to use that $500 on other, more immediate expenses and using a credit card when you could have just taken the time to save up gradually. 

How to Set Goals for Long-Term Saving

One thing we want to highlight before jumping into this section: Write down your goals! Long-term saving goals, short-term goals, goals for big purchases, even goals for other things like losing weight or being a better leader or cleaning the house regularly. If you write something down it is much more likely to stay on your mind and keep you on track! 

Ok, now that we got that out of the way, let's go over a few ground rules about setting goals for long-term savings:

  • Keep to a reasonable timeline – long-term goals should be just that, long-term. So make sure that your goals are for a year or two and not next week or next month. Also, don't make goals that are so far in the future that you will forget about them before they are realized.
  • Have deliverables in mind – This means that you should have some tangible reasons for saving money over a long period of time. Maybe it's to have a comfortable retirement or it's to purchase your first home or to finally get your dream car. Having tangible deliverables will keep you motivated.
  • Be specific – Don't just have a goal of saving "a lot of money." We don't know what that means and we can bet that neither do you. Be specific and set a long-term savings goal for an amount that you can reach or (hopefully) exceed. 
  • Break it down – Like in the last section, break down your big long-term savings goal into achievable parts so you can stay on track throughout the months and years to come. 
  • Write it down & keep it visible – We've already highlighted the importance of writing down your goals, but we also want you to keep it visible! Stick it on your fridge or your mirror or in the visor of your car to  remind you both why you are saving money and what your ultimate goal/amount is. It's like running a race: When the finish line is always in your sights you are much more likely to keep running. 

As you begin or continue the journey toward long-term saving, remember: You can do it, just keep movin' and you will reach your goals! 

Savings Accounts 101

Saving money for long-term needs and wealth means a lot more than stuffing bills in your mattress. Long-term savings need to be kept in the right type of account at your bank and, if possible, divided based on what is saved for emergencies and what is saved for long-term goals. Here are some helpful tools for finding accounts that are a good fit for you, based on high savings rates and interest amounts (money you earn from the bank);

  • My Bank Tracker – Really good tool for finding the right account type and bank for your needs. 
  • Savings Accounts – Another good resource for finding the best option in terms of interest rates.
  • Mint – This is an all-around great tool for tracking your spending and saving, but Mint also finds good savings account options for you and your money.
  • U.S. News: Money – This article lists the important questions you need to ask before opening a savings account.
  • CNN Money – Another good tool for finding the right savings account for high interest and low cost.
  • Banking – Goes over how to find a bank and savings account that offers the features you need and didn't know you need.
  • Forbes – A good article on deciding between an online or a traditional bank for your long-term savings.
  • Magnify Money – This one might be our favorite. It compares what you would earn over different time periods through interest earned from different banks and accounts. 

Lose the Debt and Save the Little Stuff

Trying to save money for the long-term while in debt is like trying to climb a tree when you're stuck in a hole. With student loans, mortgages, and the price of transportation it's hard to avoid debt nowadays. But, it is something that needs to be overcome before starting to think about saving long-term. Getting out of debt requires its own blog post, Budgetbut we can point you in the right direction by telling you to think about your debt like you'd think about a huge purchase. If you have $15,000 in student debt, start by breaking it into manageable pieces that you can pay off in chunks.

Also, it's always good to start with your smaller debts and work your way to the big ones. In this way, you can begin to pay off some of your loans completely rather than trying to tackle everything at once and prolonging some debts that could be paid off sooner. 

Another good practice is to save the little stuff. By this we mean the change floating around in your back pocket, the wad of cash collecting dust on your dresser, the coupons clipped and forgotten, etc. Saving smaller amounts of cash and using it for things like food, entertainment, unexpected pharmacy runs, and the like will keep you from grabbing the credit or debit cards and help you on your way to saving long-term. 

How to Set Everyday Goals

Maybe this section should be titled "how to save money everyday." Each day is like a building block for our larger goals, whether those are long-term or for big purchases. So each day we should be following through with those goals in small ways, like using a reusable mug at Starbucks to save on paying for a cup or buying refurbished electronics rather than brand new.

We can't really tell you what your everyday goals should be, because that's really up to you and dependent on your habits, activities and schedule. But, we do have some general tips that we think will help you with managing your money throughout the day.

Budget, Budget, Budget

Oh, did we mention you should budget? Budgeting is the number one way to make sure you are spending your money wisely each and every day. Basically all you need to do is take your total income, subtract out monthly bills and money set aside for savings or long-term goals, and, with the rest, divide it up into budget categories. So, put aside money for food, entertainment, clothes, gifts, school supplies, cleaning materials, etc. The categories are really up to you.

The point is that you are being conscious of where you money is going each month and you are tracking how much you spend on each category so that you don't go over your alloted budget. 

There's an App for ThatApp Money

There are some great digital tools out there for helping you save money everyday. These apps are customized to fit you and your lifestyle, plus we think they're actually pretty fun! 

Keep it Fun – Turn Your Goals into Personal Bets

When you are constanty focused on those big money-saving goals, the everyday savings can get tiresome. It will feel like you are never going to reach the finish line and it will be tempting to get out of the race altogether. But, we have a different idea. How about turning your everyday goals in personal challenges or bets? Make it fun! There's no one saying that managing money has to be burdensome, so let's spice it up a bit.

For instance, instead of going out and buying dinner or ordering take-out, make it a challenge for yourself that at least 3 times a week you will make up a concoction from whatever you have in the fridge. This way, you are saving money and having fun doing it (especially if you get the family involved!). Another fun one is the jar challenge. Get yourself a jar, or mug, or water cooler if you're ambitious and each day fill it with cash or change. When it's full us that money to treat you and your family to something fun! It may not be going toward your big goals but it will keep you in the habit of saving money before spending it. 

How do you manage your money? Share your personal tips and experiences with us in the comments or Facebook. We'd love to hear from you!

 

Sources: U.S. News: Money | Nerd Wallet | The Finance Geek | Smart About Money 

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