Match Your Money Saving Strategy to Your Personality
Whether you’re looking to save on your kids’ college tuition , save enough money for a down payment on a home, or just be able to comfortably retire , achieving long-term financial goals can seem like a daunting task.
This post was originally published on LearnVest .
But there are painless ways to build up your savings and keep the momentum – if you choose the method that suits you.
Experts say the key to success is honestly communicating your financial behavior and then adjusting your approach to goal setting accordingly. Do you freeze when plans go wrong? Are you inclined to ignore monthly bank statements? There is still a long-term savings strategy for you.
To help you get started, we’ve identified five types of financial personalities and asked motivation and finance professionals for the best advice on how to stay on track when your goal is months or even years.
Quick start: you caught fire from the start but burned out easily
Goal setting can be fun – far too fun for some.
“The main obstacle people usually face when setting money-related goals is that they are trying to do too much too quickly,” says clinical psychologist Ben Michaelis , Ph.D. On the contrary, “slow change is good change. When I work with patients on such goals, I always advocate less in order to get more. “
This means setting a goal with smaller benchmarks built in to achieve them gradually, every week or month, without trying to “overdo” yourself, accelerating beyond the goal you set in the first place, which can lead to failure. steam if you don’t have time.
To help you stay on track, invite a friend or family member as your responsible partner . Schedule periodic checks with this person to let him or her know what you are doing to achieve your goal. He or she can be a valuable helper if, say, you want to do whatever it takes to achieve your goal over a period of time. Ideally, this person should know you well enough to encourage you to test your limits without overexerting yourself.
Long-term planner: you love to think about the future but get lost when life gets in the way
Even if you are working towards a long-term goal, such as saving money for a down payment, you do it without knowing what the future holds. The reality is that your life can change dramatically over the next year or even the next month, which you cannot even imagine.
If you’re the type of person who likes to get all of their ducks together ahead of time, it can actually get in the way of your goal when life inevitably kicks you up.
“When you have long-term goals, it’s important not to go too far into the future,” says clinical therapist and life coach Kara Maksimov , LCSW, CPC. Remember how things can change and focus on one year or less.
She advises breaking the goal down into smaller chunks, perhaps quarterly or even monthly, to accommodate contingencies. This way, you give yourself time to rethink your money plan and change it, just like in your life, causing less stress, while still allowing you to work towards your ultimate achievement.
Flip flops: you go back and forth on what your goal should be
Just learning to set the best goal for yourself in terms of how much you want to achieve and how soon can be a challenge. “Setting a goal that doesn’t require stretching isn’t really a goal, and setting a goal that goes too far beyond your comfort level often doesn’t work,” says Michaelis. “When you set yourself goals that are a little difficult but achievable, you end up trying hard enough.”
So how do you find this golden mean – difficult enough, but still achievable?
“Ask yourself,“ What is the percentage of the likelihood that I will be able to achieve this specific goal? “And give him a number,” Maksimov advises. “If you find that the number is below 70%, you are more likely to set yourself up for failure because it’s too unrealistic. If it’s 100%, it might be too easy. You want to see yourself somewhere above 70% to challenge yourself and still be realistic. “
Consider factors such as your savings or debt repayment amount, timing of completion, or any other predictable variable that may affect your reachability percentage, and adjust the terms of your target strategy accordingly to get to that golden point.
Instant gratification: you just can’t resist spending money on what you love
While pursuing this long-term goal, you are still living your life, which can be full of enticing impulse purchases and other enticing opportunities that can distract you from the prize.
Michaelis recommends using automation so that your short-term wants or needs don’t interfere with your long-term progress. Instead of using the money “left over” from your monthly budget to save, make achieving your goal a priority by transferring a set amount from each paycheck directly to a dedicated savings account.
“If you’re saving up for something like a vacation or a high-value item, try using an automated process to make the savings happen just like that, without having to do something over and over again,” says Michaelis. (Automation also works well for pensions, down payments, and other large sums.)
This set and forget method can allow you to achieve your goal without even thinking about it. Another bonus is that automating the savings in a segregated account means you never see potential spending anyway. This way, you can ensure that your primary goal stays on track even if you decide to splurge on, say, a pair of shoes with your available resources.
Avoidant: Better Bury Your Head in the Sand Than Make a Deal
When it comes to very long-term goals like retirement, some of us tend to just not think about it, especially if it seems like we can never reach our goal. For example, you may have made a commitment to add $ 200 a month to your IRA, but you have a period of several months when that just isn’t possible … so you decide to defer making contributions altogether until you can allocate again. this full amount. …
But as you’d expect, this tactic will only derail your goals, ”says Natalie Taylor, CFP®, Financial Planner at LearnVest Planning Services . “It’s especially important to focus on what you can, even if you’re not quite on the right track,” she explains. “Something is really better than nothing, so start moving in the right direction and look for opportunities to accelerate progress over time, such as additional salaries, side concerts, promotions, renting a cheaper seat when the lease has expired, and so on.” …
Focus on the long term and try to make any progress, no matter how small, not no progress at all. Going back to the aforementioned example, even if you can only save $ 25 a month for stretching before gradually increasing that amount, it’s still better than nothing.
By thinking about your distant goals in terms of what you can work on now, and by setting your personality in a strategy that highlights your strengths and confronts your weaknesses, you can maintain momentum to finally reach the finish line.