Having a savings goal is essential for building financial security and achieving personal aspirations. Whether you’re saving for an emergency fund, a down payment on a house, or a special purchase, setting a clear goal helps you stay focused and motivated. However, many people encounter challenges when it comes to saving. Expenses can quickly add up, and unexpected financial demands can derail even the best intentions. This is why it’s important to set realistic savings goals, which are achievable given your current financial situation, income, and responsibilities.
Making realistic savings goals means setting amounts and timelines that are not just attainable but also in line with your lifestyle. It involves understanding your income and recognizing what you can comfortably set aside without putting unnecessary strain on your finances, along with factoring in several considerations.
In this article, we’ll explore what these various factors are so you can create a savings goal that works for you.
1. The Best Place to Keep Your Savings
Before you start setting aside money, make sure you choose wisely where to keep your savings. In the Philippines, there are several options for safely storing your savings, each offering different benefits. Savings accounts in traditional banks have long been trusted due to their stability and security. The presence of physical branches also offers individuals the comfort of face-to-face customer service and easy access to their accounts. However, they usually offer low interest rates.
On the other hand, digital banks have emerged as a viable alternative, often offering higher interest rates than conventional banks. Digital banks like Maya, in particular, also provide convenient mobile apps for opening and managing accounts. In most cases, you just need to find the option that says “open savings account“ in the mobile app, and you can start saving within minutes. Additionally, many digital banks offer zero-maintenance-fee accounts, making them a great choice for those who want to save without worrying about hidden charges.
2. Your Savings Purpose
It’s also important to define the purpose of your savings. Are you saving for something specific like a new phone, a wedding, a car, or a vacation? Or are you building a more general safety net, like an emergency fund? Having a clear and defined purpose will help guide the amount of money you need to save, the time frame, and the level of commitment required. For example, saving for an emergency fund requires a different approach than saving for a new gadget, and understanding this difference is key to building a successful savings plan.
In the case of an emergency fund, it’s a long-term, “just in case” savings plan that requires building a substantial amount over time. However, when you’re saving for a new gadget, it’s a more flexible, short-term goal that can be adjusted according to the timing and price of the item. You can use products like Maya’s Personal Goals for these kinds of savings; simply open an account at any time, set a time frame and goal amount, and add money to the account at any time. What’s great is that Maya Personal Goals has a guaranteed interest rate of 4% p.a., so you can achieve your goal amount faster.
3. An Achievable Monthly Savings Amount
Once you’ve defined your savings purpose, the next step is to figure out how much you can realistically save each month. Start by evaluating your income and subtracting fixed monthly expenses, such as rent, utility bills, groceries, and transportation. Then, assess how much of the remaining amount you can allocate to your savings goal without compromising your essentials.
One practical budgeting method is the 50/30/20 rule, where 50% of your income goes to needs (e.g., bills, groceries), 30% to wants (e.g., entertainment, dining out), and 20% to savings. However, if your current income can’t comfortably allow for a 20% savings rate, it’s okay to start smaller. Even setting aside 10% or 5% of your monthly income will help build the habit of saving. The key is making small but steady contributions to your savings goal, as this will add up over time. Then, once you’re in a more comfortable spot, increase your savings amount accordingly.
4. Expenses You Can Cut
Another thing you need to consider when creating a realistic savings goal is unnecessary expenses you can forego. Often, people don’t realize how much money is being spent on items or services that aren’t truly needed. So, take time to review your spending habits and pinpoint areas where you can make changes.
For example, you might be paying for multiple streaming services you don’t really use or frequently purchasing takeout food. When you identify these areas of waste, you’ll be able to redirect those funds toward your savings, making your goal more achievable.
5. Income-Generating Activities
If you’re finding it challenging to save as much as you’d like based on your current income, consider taking on additional income-generating activities. The rise of digital platforms in the Philippines offers countless opportunities for side hustles and freelance work. Look for opportunities to offer your skills in graphic design, online tutoring, or even selling products online. The extra money you generate from these activities can be directly funneled into your savings.
6. Milestones to Track Your Progress
Breaking your savings goal into smaller milestones can make the process less overwhelming and more motivating. If your goal is to save $1,750 over the course of a year, don’t think of it as a full amount. Instead, set your sights on the monthly goal: to save $150 each month. Also, celebrate small victories as you meet each milestone—whether it’s hitting a certain percentage of your total goal or reaching a specific savings amount. These milestones will help you stay focused and give you a sense of accomplishment as you make steady progress.
When it comes to a realistic savings goal, it requires careful planning and consistency. Be sure to consider the things mentioned above to help you create significant progress toward financial stability. Most importantly, remember that financial success doesn’t happen overnight. With a clear, achievable plan, you’ll be well on your way to reaching your goals. Take it one step at a time, and soon enough, you’ll see the rewards of your hard work.
