There’s no point in saving if you don’t have a goal. Then you’re just amassing money for money’s sake, which makes you Scrooge McDuck. And unless having your own swimming pool of gold coins is your main goal in life, you don’t want to be him.
One of the key goals for those trying to improve their finances is an emergency fund. Everyone says this is important—Dave Ramsey thinks you should start with a goal of a $1,000 fund and eventually get to 3-6 months; Suze Orman thinks you should have up to 1 year’s expenses saved.
Everyone is different. I decided to save 6 months' expenses: unlike couples, I only have 1 income to depend on; but I also have parents to fall back on, so 12 months is excessive. I worked to save 6 months of expenses, and I got there on December 31st, 2008! :-D Now I'm able to focus on new savings goals, and here’s what they are:
1. Vacation in Mexico: Yeah, bebe. Now that I’ve taken care of my emergency fund and retirement contributions, I can save for the fun stuff! I’m actually saving for a 4-day trip to New Orleans this Fall, and a 1-2 week trip to Mexico in February. Can’t wait! The NOLA trip I expect to cost around $800, the Mexico trip around $2500—but I’d like to save up to $3000 for it, in case I decide to take a side-trip to a certain verboten island country that shall not be named.
2. Vacuum cleaner, chaise longue, etc.: There’s a small part of my budget for what I call “short-term” savings, which is pretty much anything that I’ve decided I want but can’t afford to splurge on. My next item is a vacuum cleaner, possibly this Electrolux from Amazon (yes I'm a dork about vacuums!). After that it will be a chaise for my bedroom, like this one from IKEA, though it's a bit expensive. My roomie and I have been using folding chairs and canvas wing chairs as the only seating in our bedrooms. I’d love to have a real comfy chair there instead, where 2 guests can sit or where I can curl up with a book!
3. Contribute $300 per month to my Roth IRA: After creating my new budget since receiving my first paycheck a week ago, I determined that I could save this much every month. It’s a big chunk of my budget (over 12% of my take-home) but it’s important to me. My old company used to contribute that much and a bit more automatically; my new company only puts 3% of my salary into a retirement account, so I’ve got to make up the difference. Note: This is sort of a fluid goal, as it doesn't have a finite end goal--not ideal.
I’m tracking my own savings with these widgets: