At the beginning of the year, I made some pretty lofty savings goals for myself. After two years of allocating anywhere from 25-55% of my monthly budget for debt repayment, I was certain I could allocate 33% for savings in 2014. The first thing I wanted to do was top up my Emergency Fund to my $10,000 goal. Since I already had $2,300 saved, my goal was to save the other $7,700 in 2014 – or $642 each month. On top of that, I also randomly decided that I wanted to save $5,000 for retirement, which meant I needed to save an additional $417 each month.
We’re five months into the year now and, if you’ve been following any of my monthly budgets, you know I have not been meeting my targets. Being a bridesmaid in my girlfriends’ wedding in April took a huge bite out of my budgets in the months leading up to it, and I finally shared last week how the car accident has been affecting my finances too.
When I finally added up how much I have actually saved so far this year, and compared it to my goals, the shocking truth was that I’m seriously behind. In fact, if I still wanted to try to reach my original goals by the end of the year, I would now need to allocate 41% of my budget for savings – from $1,059/month up an additional $266 to $1,325/month.
Yea, that won’t be happening anytime soon.
So, now the question is: where do I go from here? Do I put everything I can into my Emergency Fund until I reach my goal, and then move onto saving for retirement? I put a lot of thought into that and seriously considered it. I know seeing the balance of that account hit 5-digits will be an incredible feeling. However, as I mentioned last week, I’m sick of only focusing on one goal at a time.
The problem with only working on one financial goal is that it leaves you vulnerable in other areas of your financial life. For example, when I was paying down my debt, I was barely saving any money. If I’d lost my job, sure, it would’ve been great to not have much debt, but I also wouldn’t have had any savings to help support me until I found a new one.
Now, let’s say I decided to stop saving for retirement and just focus on reaching my Emergency Fund goal. If I failed to meet just one of my monthly savings goals, not only would I be pushing back my Emergency Fund goal date but I’d also be pushing back the date when I would finally start saving for retirement again; that one realization made my decision for me: I need to save for both.
The final question: how much should I save? It’s obvious the numbers I outlined at the beginning of the year were unrealistic. However, it’s also a little sad to think my Emergency Fund may not hit 5-digits this year. But after two years of stretching my budget and, at times, living on less than half my income, I want to finally learn how to live life on a balanced budget – one that lets me save and spend guilt-free.
Going forward, I’ve decided to allocate 10% of my budget to each goal, for a total of 20% or $640/month.
This means I’ll only have $6,810 in my Emergency Fund at the end of the year, and I’ll contribute $1,600 less to retirement than I wanted to… but it’s realistic and something I can actually stick to – long-term.
How have your savings goals changed this year?