A Complete Guide to Savings Goals
One of the best financial goals you can have is to save more.
The more you save, the more security and opportunities you can create for yourself.
If invested properly, your savings can also lead to the creation of income-producing assets, setting you and your family up for a lifetime of financial success.
The guide below will break down the how, where, and why of savings, providing you with some personal savings goals and advice for reaching them.
Table of Contents
How to Reach Your Saving Goals
Here are some pointers to help you establish and meet your savings goals.
Decide What to Save for
There are some common goals that everyone should have, like building an emergency fund and saving for retirement, but the rest depend on you and your family’s values.
Factor in your long and short-term goals for the future to decide what’s worth saving for.
Here are some common expenses you might want to factor in:
- Retirement: Do you want to be comfortable and self-sufficient after you retire?
- Emergency fund: Do you want to be able to handle the unexpected without going into debt?
- Major purchases: Do you plan to purchase something significant, like a house, car, or boat?
- Tuition: Do you need to pay for your or your kid’s college education?
- Paying off debt: Do you want to reach financial independence?
- Starting a business: Do you want to start a fund that will allow you to leave your job and become self-employed full-time?
- Traveling: Do you have a short-term goal, like saving for a vacation?
- Home improvement: Do you want to give your house a little TLC?
- Wedding: Do you plan to walk down the aisle soon or pay for your child’s wedding?
These are all great things to save for, but you ultimately need to prioritize what matters most to you.
If you’re married, set goals with your spouse to ensure your goals are aligned. Come up with a list independent of your spouse, then come together to create a joint list you’re both happy with.
Related: New Personal Finance App for Couples: Our Zeta Review
Set a Monthly Savings Goal
A lot of financial experts recommend you use the 50/30/20 rule when it comes to saving.
While your savings amount might look different based on your age, goals, and income, it’s a great starting point.
Here’s how the 50/30/20 rule breaks down:
- 50: Half of your income is designated for essential expenses like your rent/mortgage, utilities, car payments, etc.
- 30: 30% of your income can go towards discretionary spending, like eating out and shopping for non-essentials.
- 20: At least 20% of your income should be put into savings.
If saving 20% of your earnings isn’t possible right now, it’s okay to start with a smaller goal, like 5%. Something is better than nothing!
On the other hand, if your financial situation allows you to save more than 20% of your income, go for it. You can reach your goals that much faster.
Establish a Retirement Savings Goal
Retirement is one of the biggest savings goals you’ll need to factor in. Some financial planners suggest you put 10-15% of your income towards your retirement.
Others recommend you multiply your overall income and set your monthly retirement savings goals accordingly.
The 80% rule is a popular strategy. It encourages you to save enough to replace 80% of your pre-retirement income, making adjustments based on your situation.
Just note that there may be annual contribution limits on individual retirement accounts like your 401(k), so you’ll want to know your limits before setting your goals.
Balance Your Savings and Debt Repayment
The models above are great as a general guide to saving, but what should you do if you’re one of the millions of Americans carrying debt?
If you’re tempted to skip out on saving money and channel all your efforts into paying off your debt, you may want to pump the brakes.
While it isn’t wise to put 20% of your paycheck away while interest piles up on your loans, you still need to save some money for emergencies.
Dave Ramsey suggests you build a $1,000 emergency savings fund before you tackle any debts.
From there, he recommends you put everything into paying off your debts until all that’s left is your mortgage. If you’re looking for a concrete strategy to follow, this rule is a good one.
But if you work at a company that matches their employees’ retirement contributions, you could put in just enough to get the match, even if you have some debt.
Otherwise, it’s important to prioritize paying off toxic consumer debt like high-interest credit cards, title loans, and payday loans, ASAP.
If you’ve tackled your high-interest debts and are only carrying debts like student loans, a car loan, or your mortgage, you can take a more balanced approach with more savings, as long as your repayment plans stay on track.
For instance, you might beef up your emergency fund and contribute the maximum to your retirement accounts.
Related: 17 Winning Tips & Tricks To Legally Eliminate Credit Card Debt (For Good!)
Track Your Finances
Once you’ve mapped out your savings goals and considered your debt, it’s time to take a hard look at your finances.
To put the 50/30/20 rule (or whatever goal amount you choose) into practice, you need to list out your own income, expenses, and savings plans.
Start by calculating your total monthly income, including your paycheck and any other benefits you receive on a regular basis.
Then take a look at your transaction history to pinpoint your expenses and spending habits.
That should give you an idea of how much room you have for savings in your current budget, and show you where there’s room for improvement.
Draw a line between your wants and your needs, and try cutting down the amount you’re spending on wants if you’re looking to save more aggressively.
You can use a pen and paper, a spreadsheet, or a budgeting app to track your expenses and build your savings plan, which should include a timeline for getting there.
Pick a Place for Your Savings Account
There are a lot of places you can store your savings, and the best spot depends on what you’re saving for.
For short-term savings, like your emergency account or a vacation fund, you should look for a vehicle that offers liquidity and growth with as little risk as possible.
If you’re investing for something further in the future, like retirement or your child’s college education, go for an account designed for long-term growth.
- High yield savings: While they may not be at their highest historically, online savings accounts typically offer better rates than traditional ones, and they’re easy to access at any time.
- MMA/CMA: Money market and cash market accounts come with some checking account features, with comparable interest rates to high yield savings accounts.
- CD: For goals with a clear end date, like buying a house in 3 years, you might consider a certificate of deposit, which usually grows at a fixed interest rate for a set term of time but is less accessible.
- 529 plan: 529 plans are state-sponsored savings accounts with compounding interest that allow you to save for your child’s college fund, with tax-free growth and withdrawals.
- Investment account: For a long-term goal like retirement, you should open an investing account like a 401(k) or an IRA. Investment accounts offer the highest returns over long periods of time.
Stay on Track
To reach your savings goals, you need to follow up regularly and stay motivated.
Here are a few pointers to keep you on track:
- Separate your savings. Combining all of your savings can get complicated. Instead, consider separate accounts, or open an account that allows you to designate deposits for different savings goals.
- Automate your savings. Whether you’re enrolling in automatic transfers to a retirement account or using a round-up app like Stash or Acorns, automating makes it easier to save.
- Set doable goals. Big savings goals can look daunting. Breaking them down into monthly or even weekly goals makes them seem far more achievable.
- Track your progress regularly. Stay on top of your savings, checking in often. Seeing your savings stack up can be super motivating and might encourage you to push even harder.
Our Savings Goals
Goal #1: Maintain a cash savings account for emergencies and short-term needs
We have roughly six months of living expenses saved for emergencies or expected short-term major expenses like our air conditioner going out.
We keep this money in our Capital One 360 savings account.
Goal #2: Save the max in each of our SIMPLE IRAs
Our main business, FinCon, has a SIMPLE IRA for all of the employees.
We plan on deferring the maximum amount of income to that account for our retirement savings.
We use Vanguard to manage the SIMPLE IRA. Our accountant sets the payroll withdrawal up so that this happens automatically.
Goal #3: Save the max in each of our Part-Time Money Solo 401(k)s
Because the total you can contribute to your Solo 401(k) is limited by other self-employment accounts you might have, make sure you are not over-contributing what you can deduct on your taxes.
In our case, we have to reduce the max savings for this account by what was saved in the SIMPLE IRA above.
We use Vanguard to manage the Solo 401(k).
Goal #4: Save for each kid in their 529 plans
I’m increasing our 529 savings by a little each month. Our overall goal here is to provide most, but not necessarily all, of the funding for our kid’s college education.
We use the Ohio 529 College Savings Plan to manage the kids’ 529 accounts.
Since we live in Texas and don’t have a tax incentive to use a local plan, we just chose a highly-rated plan.
Related: The Complete Guide to 529 College Savings Plans
What else we’ll do with our money…
We plan on being able to do a lot more with our earnings this year.
Here are two things that are high on our priority list:
- Investing more in Vanguard taxable brokerage.
- Giving 10% of our earnings away to Church and charity.
I also think it’s important to be confident about what you are saying no to.
At this time, we have no interest in buying additional whole real-estate (as opposed to shares), dividend-producing stock portfolio, cryptocurrency, art/collectibles, or additional businesses.
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We are saving money for a possible immigration, these months. If not, we’ll redirect it to our rural home development. I find it easier to save money, when you have some sort of a more tangible goal than a long term one.
Amazing article, It is a really effective plan for financial independence. Small changes in daily life help us to save more and improve financial position. Thanks for sharing this informative post with us.
Yowza! That calculations you need to do for your Simple IRA and Solo 401k contributions makes my head hurt. Like you said: “…That’s a confusing mess I know. …”
But I know it is definitely worth it.
I went overboard for a long time with tax-deferred accounts. I contributed so much to IRAs and 401Ks, I neglected non-tax deferred savings. So while I had a lot in those tax deferred items, I had little other savings. Hurt me when I wanted to buy a house. Buying a house means down payment, and down payment means cash. So let’s not neglect regular savings and investment.
My goal is to increase income as I live frugally already.
Geesh, my goal for the year would be just to get to having an emergency fund as large and long lasting as yours is. Gotta start somewhere I suppose!
Nice article,great goals to start a year. I loved your perspective towards money.
Thanks for sharing such ideas.keep writing.
I’m hoping to save for a new car this year as well… Let’s just say I’m getting pretty tired of my old one. Problem after problem after problem. It gets old pretty fast sinking money into a seemingly endless pile of problems.
Gotta get on top of my emergency fund first though before I can start thinking about a new car.
Great goals for a great year. Hoping to be able to come to FinCon this year for the first time. Started my website in November of 2017. Really looking forward to getting to know you site better along the way!
Hey, thanks! See you in Orlando hopefully!
Philip,
Great post! For financial goals, I agree that it is crucial to write them down and to track progress. Maintaining emergency funds and cash for short term savings are both valuable for as you mention to stay out of debt and to account for those unexpected or expected short term expenses. You also have fantastic savings goals regarding retirement accounts.
I also have a few goals that I hope to accomplish this year. I will continue to max out my 403B and Roth IRA, build up my savings to a designated amount, which will be allocated across a Wealthfront portfolio, short term securities, and cash, and to consistently spend less each month. My final goal relating to spending less each month is tracked through my use of Personal Capital. Every month, I can see how much I spend and therefore I can track my progress.
Good stuff!
I made it my goal to completely pay off my house in 2017 and being extremely frugal. It was definitely hard at times but in the end, it was so worth.
I like your attitude to money. But tell me, do you have a long term reserve? Recently I’ve found a book by Bodo Shafer who says that about 50 thousand is a minimum saving.
I think I could be challenged to increase my cash savings yeah. But I do have a lot of business savings which I think gives me the sense that I’m good in that department. For me, $10 could last 6 months on a very hard core frugal lifestyle. In 6 months I could come up with a game plan to bring in more revenue.
Ten Bucks? Think you’d have to be the most frugal person in the states if you could last on that!
I’m sure I meant 10K. 🙂
Yes, I thought so too. But, it is not what was written and I’m reminded of a lesson I had at Primary School (Grade School to US persons) in 1965 (Yep, showing me age, showing me age) of where a typist missed out a comma in a contract and it cost the Government 10,000 pounds to correct the mistake. In today’s money that would be around $NZ 400,000 or just under $US 295,000
So, in the real world, getting it wrong can have serious consequences. And no, the typist apparently did not lose her job.
I like your approach!
Our primary goal for 2017 have been to reduce our food cost.
So far we have reduced it by 46,87 % compared with 2016 which is mainly due to our weekly meal plans.
Thanks for the inspiration!
It’d sure be nice if they’d get the healthcare stuff sorted out so we can finally start budgeting for our healthcare properly. It’s hard to know what to do when it’s all up in the air like this, and it’s been up in the air since… well, pretty much since January 20th.
I’m not an impatient man, but come on!
Nice blog post..when it comes to finance we only think of how can we save our expenses but never think upon environment conservation..liked the idea that you have explained.
Thanks for your PT Money Shot!
#NothingButNet
How ’bout that in marketing you, & doing all you do?
feel free to use it, si vous plait!
Maybe for a NY resolution starter and/or a plug for my marketing skills on my LinkedIn profile?
My goal is to incorporate what you have done, but in a New Month’s Resolution regarding financial education & planning.
I am woefully ignorant on most things regarding financial management.
I plan on incorporating one of your principles, then mastering the understanding & practice.
Furthermore, to enrich and deepen my own understanding, I plan to ask 3 different friends who are specialized in respective fields to fine tune the implementation for me. & to optimize my understanding by teaching what I learn to others, especially my family, to help them, cement my mastery, & to learn from their questions, things that I have not considered before.
Is there a previously posted article that you would recommend for the best order to attack the $?
I am just starting out with money goals, so I am keeping it simple for 2016. I would like to continue to not have any debt and begin an emergency fund.
For 2016,I am following the reverse 52 week savings challenge, putting my spare change in a coffee can. I was lucky to have a financial plan created for me so I am sticking to that to help me get out of debt.
My debt snowball is almost complete and I will soon have all our medical debt paid off (medical bills and a student loan are the only debt I have). I’m hoping that once the snowball is complete, I can use that money to start contributing to a college savings account for my son. As a single parent, it’s a priority but I haven’t been able to free up monthly money to do it … but this is the year!!!
Our goal is to fully fund a trip to Arizona this fall and to pay for my master’s classes without incurring debt!
Just started the 52 week challenge to save $5000 in an emergency fund!
Our savings goals for 2016 include $1,000 to kids’ college fund (in a MM account), fully funding our Roth’s ($11k in 2016), saving-then-donating $5k to local charities, and otherwise preparing a long-term plan to address our Very Vintage home (which is missing helpful things like insulation and window-weather-stripping). Cheers!
I’m another person who prefers systems over goals but our plan is to invest more in dividend yielding stocks so we can get some stable income during the year. It’s something I started a few years ago, to help smooth out the unpredictability of owning your own business, and I want to do more of that this year.
Solid suggestion. I have a desire to get a dividend portfolio going as well. It’s just so hard to pass up that tax deferment. Maybe I’ll start doing a half and half approach.
Our savings goal for 2016 is to start putting money in our savings every month and keeping it there for emergencies. All to often day to day activities have become “emergencies”!
Having just become debt free (but the house) in 2015 we have a goal to contribute monthly to Roth IRAs for each of us, a 529 for our son and save up to buy my husband a new car by the end of the year.heard about you on So Money:)
Well thanks for swinging by to say hi. Farnoosh is great!
Our goal for 2016 is to get the irs paid off and start saving for taxes. My husband and I are both self employed and this has been our downfall.
Hi Holly. You won the New Year’s Resolutions Starter Kit! Congrats! Thanks to everyone for participating! Good luck saving this year!
Yeah!!! I’ll email my information.
Hey PT – Great post as always. I am also a huge fan of CapOne360 accounts because they make it so easy to have separate savings accounts for these types of things. Similar to your setup, we use separate accounts to set money aside for annual expenses (property tax, insurance, etc) and for more fun activities (road trips). For 2016, we are setting money aside each month to fund some home improvement projects.
I find setting small, short term goals each month to be more successful for me than a master plan for the year. Makes them easier to see through. Just what works best for me.
Good luck to everyone with their goals in 2016.
Thanks for the giveaway! Our 2016 savings goals are to max out retirement accounts and contribute to a vacation account. Happy New Year!
Wow, that is so awesome that you can comfortably put away that much in savings every month!! Unfortunately, I was not very good with money management until 2007, when I read Dave Ramsey’s Total Money Makeover. I had over $30k in debt and was renting an apartment. I would have been out of debt within 3-4 years, but a lot of “stuff” got in the way, including a bad marriage and divorce, purchasing my second house when I wasn’t ready, and other things. Fast forward to now, and I am well on my way to being debt free and owning a house again! I have just over $5k in debt, have a nice size 401k savings that I am continuously contributing to, have an emergency savings of about $6k, have a great engineering job, and own my own handmade jewelry business, selling on Etsy. My goals for this year is to get out of debt, and have enough money for a down payment on a house! Very excited!! 🙂
Update on my goals for 2017… I didn’t purchase the house yet. I wanted to get completely out of debt (which I did!!), and then save save save!! So now I have almost $30K saved, but I want to save more because I will still need an emergency fund and I will also need to purchase furniture, appliances, etc. plus I know there are closing costs and a bunch of fees when purchasing a house (this will be my third house purchase). I am definitely planning to have at least 20% for the down payment. I’m planning to get the house around July/August 2017. Wish me luck!! 😉
This is great, Angela! Congrats on the success so far and good luck purchasing the 3rd house.
And hopefully this will be your forever house. Buying and selling houses is a monumental money pit.
And yeah, congratulations on getting to where you are now.
Remember, furnishing your house with pre-loved furniture and appliances is a frugal way of staying out of massive debt. So what if it isn’t new, if you buy new and install it in your home it magically is now used, so therefore not new.
Buying new clothes at a store? Read a comment from a sales assistant that most items have been tried on in the shop between 5 and 7 times before being sold. So technically it is used clothing. Food for thought? Apparently there are people who are shocked at that revelation because they “pride” themselves on never wearing clothes that other people have worn. LOL
Our families’ plan for 2015 lists charitable contributions. I just had a Date Night with the hubby where we talked about how much $$ we’ve allocated for 2015, and we determined which causes we can support. It’s also important that the kiddo sees that giving our time/talent/treasures is part of our regular life.
I also have a savings goal connected with a small marriage-building trip. Think camping just the hubby and I for 4 nights or so. I have to plan for stuff/food/childcare/PTO and more, but a focus on marriage is a priority we have learned to make.
It’s not that your 2015 goals are bad….I just wonder if they really reflect the Big Picture? And maybe they do?
Penny, thanks for the comment.
I agree if giving is a wish it should be planned out and part of a budget or saving goal. We do the vast majority of our giving regularly through our Church with automatic withdrawals before we spend on anything else, including savings. So while a part of our monthly budget, they aren’t something we save for gifting later at a different time.
I love the marriage priority.
The majority of people don’t have a 12 month emergency fund. It’s unfortunate but most people find it hard to save money, this is why my favorite tip of yours is automating your savings. Much needed tips to start the new year.
Philip,
Great post on your savings! Your financial outlook pretty much mirrors what me and my minions are trying to achieve.
Your Capital One 360 savings accounts is genius and I’m going to steal that idea to help keep a clear picture of how much is in each fund, as opposed to one big emergency fund account.
Do you use any brokerage accounts to save for the long term? I know they are risky, but could potentially give a higher return than online savings accounts.
Ian, my long term savings is my main focus and we use Vanguard target date funds in tax-advantaged accounts. I do have accounts with Sharebuilder ($1.5K) , Betterment ($10K), and Motif Investing ($.5K). The Betterment account is an extension of my emergency savings. More risk, but more return. I’ve also dabbled in $5K-$10K debt and real estate investments, with higher return. But I wouldn’t feel comfortable with all my emergency savings in anything other than FDIC insured products. Thanks for the comment. 🙂
It seems like you’ve got everything covered for this year. These are definitely good points to consider when saving and making sure you don’t have loopholes because you’ll never know. I might just make adjustments to my savings goals this year and take note of your plan.
Have you ever thought of having a ‘fun’ savings? Other people might find this funny, but I’ve been thinking about having one for this year. This can go to those I-want-this purchases and maybe some little trips here and there. What do you think?
Great idea! I think we would probably consider our Travel savings account the fun account. But I didn’t really consider other “I want this” type spending. Definitely should be a part of any regular budget.
Do you save up for a replacement car? That is one of our savings categories. We also save for our donor advised charitable fund. Since we no longer can itemize every year, we bunch schedule A items every few years. Our fund allows us to do that.
I don’t know what our goals will be since we are considering a move closer to my husband’s job, which will sadly put us back in a mortgage.
We are not. But we should probably be putting something aside for that. Even if it’s just a small amount. In the past we’ve replaced our vehicles in the year of a big financial win – bonus, unexpected income, etc. But I know we can’t necessarily count on that forever. Right now we have a 2012 Honda Odyssey we purchased brand new. That will last us another 8-10 years at least. So it’s hard thinking about such a distant purchase.
I didn’t know about the donor advised charitable fund. I will have to look into that when we lose our home mortgage interest deduction.
Au contraire… if you can think about retirement savings and the benefits of saving now for later it isn’t really a paradigm shift to think of saving for a replacement car, or a replacement anything for that matter.
My strategy is purchase an item. Estimate its lifespan, knock 20% off that time to try and butt cover for worst case scenario and have to replace early. Use that second lifespan time to calculate how much you would need to save in today’s prices for replacement and divide by your pay periods. So if you are paid monthly (OMG how do people DO that?) then divide by twelve. Fortnightly and weekly by the appropriate numbers.
Works for me…
Excellent post.
When we used to live in Europe, we had similar goals. Now that we have a child with special needs, everything has fallen apart, but plan to get over this next year. Thanks for kicking my rear end 🙂
Thanks, Noel. And you’re welcome. Best of luck in 2015!
Sounds like you have most of the bases covered. I’d say go ahead and get things automated right now. It probably took longer to write this post than it would take to go ahead an automate your savings 🙂
I also have a rental property and never thought of the idea of opening a small business account for it. Must look into that option!!
I’ve got the 52-week challenge on automatic. My plan with that money is perhaps take a volunteer vacation down under (NSW-Queensland) around Christmas. I just need to remember it’ll be hotter than the hubs of h*ll during that time. I need to pay my way down there and, depending on the non-profit, will get free room and board. There’s a wildlife reserve down there that needs volunteers to work. That would be hard work, but truly rewarding. So, that’s my travel goal for 2014.
When I am once again gainfully employed – I am currently going to school FT – through my employer, I’d like to get an HSA account started if they offer it, as well as get back on track for my 401k. My EF is on automated as well…..thankfully, through the VA I qualify for VRAP, so am getting a sizable chunk of money from them to help with school and living expenses. No car loan to worry about, just insurance.
One small step at a time…..
Some of these goals are similar to mine. I have been wondering about pulling my property taxes and home owners insurance out of my escrow and just doing it on my own, since I can at least get interest on the money. I have a baby coming in the next few weeks, so I have been saving for that for a while.
DebtRoundUp,
Congratulations on the baby! My wife and I just found out we are having twins. A total shock to say the least!
Is your new baby savings for day to day expenses or college fund? I would be curious to see how you figured on how much to set aside each month.
Those are all great savings goals! What about saving up for vacations? We have a fund that we call a “Travel” fund where we put money in order to have cash to pay for vacations every year. This year we were able to go to Hong Kong and Singapore all thanks to having a plan and putting money into a savings account designated for vacations.