How to save up for your goals while still buying those boots
Saving while still spending might seem like a contradiction, but it’s actually only natural. Verena Metzler from financial planning experts FrauFUTURE explains how you can balance living in the moment with thinking about the future.
Saving up for your goals can be a daunting task in today's world. There is always something to buy, a new country to explore, or a restaurant to try. So it’s either you’re constantly broke or you cut back on life completely, right?
No, not at all. Balancing your desire to live in the moment with your long-term financial goals is tricky, but it can be done. It demands a well-crafted budget plan that is both practical and efficient. A good budget plan is based on your life, and not the other way around. Here’s how it’s done.
Step 1: You need to know your goals
To start planning for your future, it's important to identify your goals. Would you like a small farm, a mobile home, or an apartment in a bustling city? Do you want a large family or would you prefer not to have children? Are you looking to switch jobs often, stay put, or potentially start your own company? Once you have a clear idea of what you want, you can determine how much money you'll need to achieve it.
Step 2: What are your incomings and outgoings?
The next step is to navigate towards your desired life, whether it be personal or professional. This will bring you back to the present moment and help you assess your current financial situation.
It's important to determine your monthly income and your expenses. You may be surprised by what you discover about yourself once you understand where your money is going. But don't feel ashamed if you spend a lot on Uber, coffee to go, or numerous streaming subscriptions. This newfound knowledge can help you identify areas where you can cut back without sacrificing what you enjoy.
Tip: Not all costs can be cut, and it’s not just rent and health insurance. For example, if you must go to business lunches frequently, these expenses are part of your essential costs and can’t be cut back on.
Step 3: What is left to work with?
After deducting your necessary expenses from your income, calculate the amount of money that remains at the end of each month. This remaining amount is what you can use for other purposes. A useful tip is to base your calculation on your worst earning and spending month of the year, especially if they vary each month.
Step 4: Start spending money!
Now it is time to begin spending your money, but in a responsible way. The first bubble to prioritise is your emergency fund. It’s important to consider what you would need in case of unexpected financial hardships. A good rule of thumb is to have at least three months’ worth of overall expenses saved in your emergency fund.
If you have already achieved this goal, you can allocate more money towards your other financial goals. Haven't reached this target yet? Don't worry. You can set a specific amount to be automatically transferred to your emergency fund each month until you reach your desired savings amount.
Step 5: Having fun is important!
One way to make sure you're living your life to the fullest is by creating a "fun bubble" in your budget plan. This bubble is dedicated to all the enjoyable things you want to spend money on, such as a new pair of boots, a pricey concert ticket, or a glass of wine every now and then. By setting a limit for your fun spending, you'll be able to enjoy life without overspending. Once you've reached your monthly limit, you'll know it's time to stop.
Step 6: Take care of the future
Your ability to save for long-term goals depends on the amount left over each month after allocating funds to emergency and fun. With these taken care of, you now have a clear understanding of how much you can set aside for your future.
If you find that you need more money to achieve your desired goals, you can revisit steps 2, 4, and 5. There may still be areas where you can cut back on expenses, such as using ride-sharing services less frequently. Alternatively, if your objective is a pleasurable experience like a dream vacation, you can reduce your fun spendings to save up for it. Your commitment to saving will ultimately reward you with an unforgettable vacation.
Tip: Don’t cut back on fun for too long. If you do, it will be like you don’t have a fun bubble at all, leading you to lash out sooner or later.
By using this simple method, you can create a budget plan that aligns with your lifestyle. This will lead to a brighter future while still enjoying life in the present.
Taking care of your life can be overwhelming, especially when it comes to your financial goals and career aspirations. That's why seeking professional assistance from experts like FrauFUTURE can make a huge difference. With their expertise and genuine interest in your success, you can replace anxiety with excitement for the future and the satisfaction of achieving your goals. Let them help you take the first step towards a brighter tomorrow.