Best Savings Strategies for Short-Term and Long-Term Goals

Author: Jeff Horner, Wealth Strategist, Private Bank 08/16/2023

When you know you have a big expense in the future, saving money might be the most frugal choice you can make. While you could consider taking out a loan to cover the expense, especially if the cost is large, debt can quickly become unmanageable if you’re not disciplined. In addition, if you don’t have great credit, you might get stuck with high interest rates. To save yourself from financial debt and regret, starting a savings fund could be a wise choice. Your financial goals may seem daunting at first, but with the right strategy, you will be able to grow your savings and avoid falling into debt.

What is Considered a Short-Term Goal?

For major expenses that you anticipate within one to five years, you want to set a short-term savings goal. Some examples of short-term goals might be buying a new car, paying off student loans, or paying off credit card debt. What if you don’t have any credit card debt or loans and don’t plan on buying a car in the near future? You should consider making an emergency fund your short-term goal. An emergency fund is a financial safety net for when the unexpected happens, such as illness, unemployment, or anything that disrupts your income. Your emergency fund should be able to replace your income for at least three to six months.

Short-Term Savings Strategies

Stick to a Monthly Budget

This is probably the best strategy you can apply to any of your financial goals. Creating a monthly budget will give you a clear picture of your expenses and help you determine how much money you can realistically save each month. There is an abundance of budgeting tools available online that can break down your monthly expenses for you and give you a better idea of where your money goes.

Set Up Automatic Savings

Once you break down your expenses, you can determine how much you can put away toward your savings goal. It’s important to pay yourself first. If you have trouble sticking to your budget, set up automatic transfers to make sure you are working toward your goal. Also, it might be helpful to have your savings account with a separate bank. This will make it more difficult to move money between accounts, and you will be less likely to dip into your savings.

Spend Less

Sticking to a budget could make you aware of areas where you can cut back on expenses. There may be spending leaks that need to be addressed, such as subscriptions you aren’t utilizing, household items that have cheaper alternatives, frequent dining out, etc. You should be monitoring the statements for all your financial accounts for any charges you weren’t aware of.

Consider an Accessible, High-Yield Account

To get the most out of your savings account, you might consider getting a high-yield savings account. Shop around for rates before settling on an account so that you get the best rates available. If your balance is relatively low, finding an investment account to invest your savings in, such as a money market fund, could have better results. It all depends on the amount of your savings goal and the length of time you are willing to wait to let your funds grow.

What is Considered a Long-Term Goal?

Long-term financial goals are typically for much larger expenses that are more than five years in the future. Some examples of long-term savings goals are a down payment on a house, student loans, a college fund, or a retirement fund. The money you put toward a long-term goal is money you don’t plan on needing in the near future.

Long-Term Savings Strategies

Invest in a Retirement Account

For financial goals in the far future, retirement accounts are a good way to steadily build your savings. If your employer offers a contribution match as part of your benefits, you should take advantage of it by contributing the maximum amount that can be matched. Set up your retirement contribution to automatically increase as your salary increases. Combining your investments with other types of accounts, such as a Roth 401K or Roth IRA, is another way to maximize your savings.

Create Separate Accounts for Long-Term Goals

Just like your short-term goals, you should have a separate account for each of your long-term savings goals. This will make it easier for you to keep track of your finances and contributions. If you have a savings fund that other people have access to, such as a college fund, then they will only have access to the funds you have put aside for them.

Don’t Let Short-Term Goals Distract from Long-Term Goals

It can be tempting to short yourself on your long-term savings goal in favor of a smaller, more immediate expense. If your long-term goal is a down payment on a house, think of it as taking something away from your future home. Consistency is key when building long-term savings so it’s important to keep your eye on the bigger prize.

Explore Other Income Opportunities

You might decide to increase your income in order to contribute more toward your savings goal. This could include growing your career by working for a promotion or researching other opportunities to increase your pay. Many people decide to work a second job in order to reach their financial goals faster. There might be a hobby or skill that you can turn into an additional source of income.

If you haven’t begun working toward your next savings goal, now you have a few strategies you can implement today. By having a clear picture of your financials, you will be better equipped to reach your short-term and long-term savings goals. Your savings strategies may change over the years; your savings goals may also change. The unexpected may happen, and it’s crucial to stay flexible.

PlainsCapital Bank helps our customers build their wealth and develop financial strategies that fit their priorities and lifestyle. To learn more about building your savings and reaching your financial goals, visit PlainsCapital.com.

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