We all have dreams for our financial future. But we also have needs we must meet in our financial present. So how do we know what we should save for and when? After all, when we know what we are saving for, we are far more likely to stick to our savings guns. At the same time, it’s difficult to strike a balance between saving for now and later. Consider these three examples to help you set your savings goals:
When to Save for Now: You may think, “I’m doing a good job covering all my necessities. So I don’t need to save for now, instead I’ll save for the future.” But if we are not prepared, an unexpected expense can disrupt our financial security and peace of mind. Make a point of setting money aside to specifically cover these unforeseen financial demands. Consider building an emergency fund capable of covering at least one month’s unemployment. Without an emergency fund, an unexpected expense like a mandatory car repair can claim a major chunk of the funds you meant to contribute to the future. Build an emergency fund now, so you can avoid financial headaches and save more effectively for the future.
Why Save for Later?: You may dream of winning the lottery or be counting on an inheritance. But most major financial goals will not be met by some kind of windfall. Rather, our financial milestones will be accomplished through years of contributing to a long-term savings plan. If you plan on buying a different car, owning a home, or retiring, you will need to make the decision to save as much of your money as possible for later.
Saving in the Moment: When we are faced with an opportunity to spend, it can be difficult to stick to our goal to save. We may succumb to making self-rewarding credit card purchases in the heat of the moment for products and services we really can’t afford and aren’t necessities. It is important to remember that our debts grow interest. And the interest that grows our debt is money lost that could have otherwise been saved.
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