Adjusting Your Goals When Life Changes
When a big change happens in your life, you may find that your financial goals need adjusting. Maybe you have less discretionary income to work with. Or, maybe you have a new person in your life and you want to make sure you’re both saving toward the same goal. Whatever the case, you may have to change, delay or even set aside certain goals as you reassess your financial situation.
For example, if you need to move somewhere more expensive on short notice, you may have to put off buying a new car. Until you’ve moved to your new place, you may not know if you’ll have enough funds each month to continue saving for that car. You may find that you put saving for that goal on hold until you can cut expenses further or get a second job.
Let’s look at a few life events that can lead to you adjusting your savings plans and how you can prepare yourself ahead of time:
If getting married is even a blip on the radar, you may want to start saving now. Savings accounts and money market accounts are great ways to save for a wedding, but if you have a wedding date in mind, you may save faster with a certificate that matures just before your deposits are due. Just don’t divert funds from more vital accounts like your retirement fund when you can find ways to cut wedding costs or trim your monthly expenses. When you decide to tie the knot, you should also discuss with your partner how finances will be handled. Will you have separate accounts? A joint account? Both? Discuss your financial goals so you know what you both want and when.
Having a Baby
Even before your baby is born, you’ll be spending money on maternity clothing and baby equipment. Try to buy used when you can (baby clothing and equipment don't tend to see years of use) and save up for the hospital visit and years ahead. Consider opening an educational savings account like a 529 plan or a Coverdell education savings account. The earlier you start, the more you can have by the time your child graduates from high school.
Losing Your Job
Prepare for unexpected job loss by building an emergency fund that can keep you afloat for 3 to 6 months. If you do become unemployed, you’ll want to stretch these savings as much as possible by putting most or all of your savings goals on hold and cutting as many unnecessary expenses as possible. For example, use public transit when you can or ride a bike. Cut back on nonessential spending, like going out to eat. You may also take on temporary or part-time work until you find full-time work. Once you’re employed again, work on rebuilding that emergency fund.
Reworking Your Savings Plan
It’s so important to have a cash reserve. If you’ve taken on more responsibility, like a new baby or an unexpected debt, you may be tempted to stop saving. But just because your life situation has changed, it doesn’t mean you can’t continue saving. You just may need to rework your plan.
Remember-every contribution, no matter how small, will keep you moving toward your financial goals.
- Are there any expenses I can cut so I can still save?
- Can I adjust the amount I save so I can still move forward?
- What could I do to make sure I contribute something to savings?
Is there a debt you could pay off early so you can use the amount you would have paid monthly for your savings contribution?
Adjust the Amount
If you can’t make a full contribution monthly, what amount could you contribute? Could you manage a contribution every other month if you can’t contribute every month?
Set a Goal
If you can’t set aside the same amount every month, you might want to consider setting a goal and work toward that amount. You can use a savings goal calculator to help you decide how much to save or how long it may take to reach your goal.
Get Interested in Interest
How you save is as important as how much you save. Some accounts pay more interest than others and will help you reach your goals faster. Get the most for your money by looking for savings options that pay the most interest.
The most important thing is to have a plan to help you to stay on track so you can build a better tomorrow.
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