Assess your financial situation
Now that you have created your budget and defined the cost of your goals, it is important to examine your finances and determine how to best achieve your goals. This entails primarily two steps:
- Examine your budget to determine how much you can afford to save
- Identify ways to save or earn more money so that you can apply it to the savings plan(s), if necessary
Examine your budget
Whether you have decided to save fixed amounts or fixed percentages of your income, it is imperative that you ensure that these amounts are reasonable and affordable. First, make sure that you are not trying to save money that you need to live on or to pay your bills. Putting new purchases on a credit card charging 18% just so you can save for one of your goals is not going to help you. Carefully examine your budget and select amounts that are affordable. If you didn't create a budget, it now is the time to create one.
Second, make sure that you are prioritizing your goals as well as the amounts that you propose to save. For example, it would not be wise to fund your child's education while sacrificing your retirement. In most cases, you should be able to adjust the timeframe of your goals and thereby allocate something to each goal if it is important. Saving a little less for college, or postponing that trip around the world for one more year may be ways to allocate something to all of your goals. Whatever you decide, make sure that you are taking care of your financial needs first.
Find more money to fully fund your goals
If you still feel like you need to save more for your goals, without sacrificing your other priorities, there are two options: 1) find a way to save money, and 2) find a way to earn more money. Carefully examine your budget to identify places you might be able to save money. If it has been a while since you kept track of your daily expenses, do it again. We have worksheets in our budget section that you can use to detail these expenses. After recording them for a month, you might be surprised how many ways you can find to save that $1 a day that will fund one of your goals. If you still can't find ways to save enough, you might consider a part-time job. Even working just a few hours a week could make a hugh difference in your financial plan, without dramatically impact your life. Just make sure that if you choose this route, that you use the money from this job to fund your goals and not more spending.
Step 7 - Develop Your Plan