Managing your money

Chapter 1: Set Goals

Setting financial goals is exciting – it is your opportunity to decide what you truly want to do with your money, and to achieve those goals without having to borrow for them.

Set specific goals
Financial goals are specific rather than vague. Before you start to save, determine exactly what you want, when you want it, and how much it will cost.

There are three basic goal types: short-term (achievable in under a year), mid-term (achievable in two to five years), and long-term (achievable in five-plus years). If you have multiple goals, you may choose to work toward them all at once, or concentrate on one and then move to the next. Calculate the amount you need to save:

For short and mid-term goals, the calculation for how much you need to set aside each month is simple: the cost divided by the number of months you have to save.

Example: The laptop computer you want is $800, and you would like it in six months. To reach that goal, you will need to set aside $133 per month ($800/6 = $133).

Long-term goals are a little more complicated because of something positive: you can deposit your savings into an investment vehicle and earn interest, which will help you achieve your final savings goal. Use a financial calculator and plug in the numbers:



Example: Your goal is to save $10,000 in ten years for your child’s higher education. If your annual rate of return (interest) averages eight percent, you will need to set aside just $55 each month.

Note: The interest you can earn depends on the investment product you choose. The higher the reward, though, the greater the risk. Never enter into any investment arrangement before researching and understanding it completely.

Be flexible
When saving for goals, be flexible. If you simply can't manage to put away the amount you thought you could, don’t give up. Consider extending the goal achievement date, reducing the goal amount, or increasing your income so you can save more.