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Do not save what is left after spending, but spend what is left after saving. – Warren Buffett
A reader requested that a blog be written on saving for short-term goals. Short-term Savings in financial terms usually means two years or less.
A recent blog discussed the best places for short-term funds (See: SHORT-TERM FUNDS- NO PARKING.) There is also a blog on emergency funds (See: DO I NEED AN EMERGENCY FUND?) This reader had a different concept in mind. The question concerned saving for short-term goals, and different options for saving. Saving and finding cash for special goals always seems to be difficult. No one ever seems to have extra cash laying around. But, modern technology, computer programs, and money-saving applications provide multiple saving pathways for short-term goals.
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Saving for Short-term goals
- Old school envelope system– one of the very basic systems is to partition dollars into different envelopes for different goals or expenses. Each envelope is dedicated to a different need or goal. Once the money is placed in an envelope, it’s not accessed until needed for that specific purpose.
- Opening a dedicated account– a special account at a bank or financial institution is opened and dedicated to a specific goal. Money can be automatically drafted into the account each month, or part of each paycheck can be diverted into the account.
- Savings Apps– there are many good choices on the web for those interested in apps to help save (in no particular order):
*Clarity Money– this app finds and cancels wasteful subscriptions. Clarity Money can also help you lower your bills, find credit cards, alert you if you’re overspending, and you can set aside money in a savings account for special goals.
*Qapital– sets aside small amounts of money not needed for household expenses. The account holder can define particular savings “rules” and “triggers,” such as rounding up the change on each purchase, saving budget surpluses, or saving a fixed amount daily, weekly, or monthly.
*Halfdollar– no frills and easy way to track monthly spending.
*Digit– Digit analyzes spending and income and saves the excess not needed for expenses. Small amounts of money (usually between $5 and $50) get transferred from your checking account to a Digit savings account. Works on the principle: Out of sight, out of mind.
*Truebill– this app scans online statements and identifies subscriptions that have increased fees, and allows the cancellation of subscriptions no longer desired with a single click.
*Budgt– this app creates a new budget for you every day based on previous monthly spending. Input recurring and one-time expenses, set your savings goals, and Budgt will provide the amount available to spend.
*Spendee– income and expenses are inputted manually. Spendee analyzes spending and creates a very accurate analysis.
*You Need a Budget (YNAB)– built around a four-step plan:
- Give every dollar a “job.”
- Embrace your true expenses (breaks down large recurring expenses into more manageable monthly debits.)
- Roll with the punches (Address overspending.)
- Age your money (Arrange finances to pay living expenses with last month’s income.)
*Prosper Daily– allows viewing of multiple accounts, optimization of finances, keeps track of the credit score, monitors spending by category, and provides one view of all recurring monthly spending. Prosper Daily also provides real-time alerts to unauthorized or fraudulent charges.
*Pennies– allows multiple budgets with easy money transfer between accounts. Color-coded indicators facilitate easy tracking of available money to fund financial goals.
*Coupons at Checkout– browser add-on that finds valid coupon codes whenever you hit any online checkout page.
*Long Game– redirects some of the cash people spend on lottery tickets into savings. Users get a chance to win extra money (called prize-linked savings, and users have the chance to play games and win more cash.)The account is FDIC-insured, you’re not playing with the principal, and the app also pays 0.1 percent interest on the balance.
* Chime– money can be directly deposited to your Chime account. Chime can move a percentage of your paycheck into your savings. A round-up option is also available.
*Current– sets up savings goals (or “pods”) to automatically sweep money aside for your chosen goal, a rainy day fund, a vacation, or directly into your savings account.
*Acorns– puts your spare change into an investment account. Acorns rounds up your purchases to the next dollar and invests the change in a diversified investment portfolio based on your goals. You can also set up a recurring transfer into Acorns.
*Mint– organizes and monitors your accounts, all in one place.
*Qoins– you set a financial goal to put aside money each month. Account holders can also make little transfers throughout the month to reduce total debt.
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- Using the 50-30-20 Spending Rule– budgeting 50% of income for needs, 30% of income for wants, and 20% of income towards savings.
- Use a cash-back credit card and bank the cash-back reward.
- Make extra money by signing up for online surveys. (make sure you only provide personal information to reputable sites.)
- Use sites like Rakuten or TopCashBack to generate additional cash back on online purchases.
- Drop unused subscription services– any unused subscription service such as gym memberships, magazine subscriptions, streaming services, and any other unused service can waste dollars every month that could be saved or used to reduce debt.
- Buy and sell used– buying and selling used items generates money from the sale of items no longer used and dollars are saved by buying used (discounted) items.
- Comparison shopping– compare prices on everything before purchasing.
- Price adjustments– many stores have a price adjustment policy that lets someone reduce their purchase price (price adjustment) within a certain amount of time if the same item is offered for a lesser price elsewhere.
- Cut “Cable”– disconnecting the cable and moving to a streaming service can save considerable money.
- Save on utilities– reducing energy consumption by the use of careful monitoring, turning off lights and unused electronics, switching to LED lights, using energy-efficient appliances, and through the use of energy monitoring and energy conservation devices.
- Company-sponsored retirement plans– offer an excellent way to save, take advantage of employer matches, and reduce taxable income.
- Lower your insurance bill– monitoring and reevaluating insurance needs annually can significantly reduce costs.
- Reduce investment fees– switching to lower-cost funds, using ETFs, and using free investing apps can all save money.
- Eliminate bank fees– many banks and financial institutions offer free banking.
- Increase earnings– working more hours, extra projects, overtime pay, and side hustles can all provide extra income for savings.
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What to do With the Money
- Make sure all applicable dollars go into your savings account.
- Set it and forget it- don’t access or use dedicated funds for any other purpose.
- Don’t over-promise- set reasonable goals and guideposts. Being overly ambitious may be worse than not saving at all, as it sets up a mindset of failure if the goal is not realized.
- Begin with small amounts or goals- making small victories creates a positive mindset for bigger goals.
- Start early- use the power of time and compounding to your benefit (See: INVESTMENTS AND COMPOUND INTEREST.)
- Save as much as possible to jump-start your savings.
- Creating a saving habit can reap long-term benefits by creating a lasting saving habit and creating excitement for debt reduction actions.
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Regardless of which technique or app you utilize, there are multiple saving options for short-term goals. The hardest step is the first step. A journey of a thousand miles begins with a single step. Each person must believe that their goal is possible and attainable. Each small success leads to bigger success. But, one must believe that these successes are possible, and more importantly, one must believe in their ability to achieve their life goals. Short-term goals are one small piece of the ENOUGH equation.
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Final Thoughts
- Modern technology, computer programs, and money-saving applications provide multiple saving pathways for short-term goals.
- Eighteen different ideas for saving for short-term goals were presented.
- Seventeen different applications to help with saving for short-term goals were provided.
- There are multiple saving options for short-term goals.
- Each person must believe that their goal is possible and attainable, and one must believe in their ability to achieve their life goals. Short-term goals are one small piece of the ENOUGH equation.
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