Saving for goals

For years I wanted to travel “one day”. One day never came, because one day isn’t a date.

A goal without a number and a deadline is just a wish. A real savings goal has three parts:

1. What it’s for: a trip, a car, a course, a deposit on a home.
2. How much it costs.
3. When you want it.

The monthly number

Once you have those, the maths is simple:

Monthly saving = (target − what you’ve already saved) ÷ months to go

James wants a trip that will cost 600,000 in 10 months. He’s already saved 100,000.

• Still to save: 600,000 − 100,000 = 500,000
• Each month: 500,000 ÷ 10 = 50,000

Now “travel one day” is “save 50,000 a month for the next 10 months”. That’s something he can automate.

Seeing the monthly number made it real. It also made it honest: if I couldn’t afford 50,000 a month, I needed to push the date back or pick a cheaper trip. Not just hope.

Short, medium and long term

• Short term, under a year or two: a holiday, a new phone, a course. Keep this money in savings.
• Medium term, around two to five years: a car, a wedding, a deposit. Mostly savings, depending on how fixed the date is.
• Long term, five years or more: a home, financial freedom, retirement. This usually needs investing to beat inflation (Level 5).

Which goal comes first?

You probably have more goals than money. A sensible order:

1. A starter emergency fund, so surprises don’t become debt
2. Expensive debt, like credit cards and payday loans, which you’ll tackle in Level 4
3. A full emergency fund
4. Your other goals

Make goals easy to keep

• Give each goal its own pot, and name it: “Lisbon trip”, not “Savings 2”.
• Automate the monthly number on payday.
• Track your progress. Watching a pot fill up is surprisingly motivating.