How To Set Savings Priorities On A Budget

Setting aside enough money to fulfill all of the ideal requirements on a budget is tough, especially in these times. However, it isn’t impossible if you set achievable goals.

Financial advisors claim that there are 3 areas you shouldn’t negotiate savings for; maximum contributions to your employee matched retirement plan, eliminating high interest debt and building a well padded emergency fund. Buy making these three areas a priority you are able to reap the maximum benefits of tax friendly retirement plans, reduce costly debt and avoid incurring more debt when an emergency presents itself.

After these three goals, you must then determine what other savings goals you are working towards. They may include saving for a new car, the down payment on a house, college education or any number of short and long term goals. It is impossible to prioritize your budget if you are unaware of what you are actually working for in the end.

After deciding your financial goals, you need to determine just how much you will be putting in each area each month. This will be determined by how much time you have between the beginning of your savings and the end goal. It is much easier to set aside a small amount each week, or even each month than trying to come up with a large sum of money at one time.

It is important to set realistic goals and to remain somewhat flexible in achieving them. While it is not advisable to be too flexible, it is a fact of life that other situations arise that often delay our savings goals. This may include job loss, illness, family obligations or any number of common life occurrences. Instead of feeling hopeless, simply address the current situation and set new goals. It is important to anticipate these events and not allow set backs to make you give up. These little bumps in the road are normal, just adjust the savings goals and you won’t be too far off track.

One mistake that people make is to loan money to family members that they can’t afford to give. When “loaning” money to family and even friends, don’t expect to get it back. Some people will actually give it back (often many years later), but in other cases the recipient of the loan can’t or won’t repay the money as promised. This puts a strain on the relationship, and unless it is your parents or your children, these relationships often do not withstand these negative consequences of owing or being owed money.

Good luck with your savings goals. Remember to start with the nonnegotiable savings and then add in the other goals. Be prepared for those life moments with savings, and negotiate with any “needed” money requests from family before giving it away.