148 | Setting and Achieving Your Savings Goals

Learning the skill of saving money is one of the best things you can do for your finances.

So many people never learn and consequently either don’t save at all or do so inefficiently.

Like any other piece of your money plan, saving starts with having a goal.

In this episode, let’s talk about the importance of setting savings goals, a strategy for saving that increases your ability to achieve your goals, and where to save your money.

• why it’s important to set savings goals
• typical advice on emergency savings
• a powerful strategy to approach your goals
• where to save your money

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If you’re ready to learn the mindset and strategies to master your money, let’s schedule a call.

You’re listening to Wealthyesque. We are a community of lawyers who believe that true wealth is having control of our time. I’m Rho Thomas, and as a busy wife, mom and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back to the show, I hope you’re doing well. And having an amazing day so far. Today, I am sharing a video or I guess the audio from a video from a pop up Facebook group I did. This video was all about savings. And we went through the things you want to think about when you are setting your savings goals, and how you can actually achieve them. So let’s dive in. Hey, there, I hope you are doing well today having an amazing day. Let’s talk about savings. So often I see people who have not started saving at all, or they haven’t saved as much as they would like, you know, they only have a few, you know, $1,000 or $1,000, whatever it is and their account, they would like to have more. And more rarely I see people who are saving just to save. So they are saving every single month putting it into the savings account, you know faithfully, and it’s just this big pot of money, and they have no idea why it’s there or what it’s for. And so I encourage you just like with any other goal within your money plan to set a goal and decide how much you want to have in savings for each of your goals. So the very first goal that most of my clients set is to establish an emergency fund, right, like typically, if they have a savings goal, that’s the first one that they want to work toward. And so is determining how much you want to have in your emergency fund. Some people do as little as you know, a month’s worth of expenses, some do as much as 12 months of expenses. Typical advice is three to six months of expenses, and that is your bare bones expenses. So you don’t have to save three to six times what you’re spending right now, right, it’s three to six times what you would need in an emergency. So what expenses are truly important, those types of expenses that you would be still spending on in case of an emergency, you want three to six times those expenses, or whatever amount you decide is good for you for your emergency fund. Just like with anything else in personal finance, it is personal. I think it depends on your preferences, your risk tolerance, all of that, but determine how much you want to have in your emergency fund. And then let’s focus on that goal. And I think oftentimes, we are trying to spread money across all these different goals. We’re doing all of these different things all at once. And it makes it really hard to make progress on any one thing. So one of my favorite books is Essentialism by Greg McCune. And in it he has this really effective visual of like two circles that represent your energy. And he talks about how many of us are splitting our energy amongst so many different things, right. So you know, the circle on the left has a bunch of smaller arrows shooting off from it similar to like if you were drawing a picture of a son, and a circle on the right has one long arrow going in one direction. And he says like, what if instead of making a little bit of progress on a bunch of different things, you made a bunch of progress on the one thing that matters. And so I applied that same concept to personal finance, like rather than making like this little bit of progress on every single goal, what if you made one progress on the one goal that’s important to you right now. And then once you achieve that one, move on to the next one. So I tell clients to focus on the thing that’s important. Like let’s figure out what goal is most important to you. Now, let’s focus on that one. And then once you’ve achieved that move on, now, that is not to say that you are completely cutting out every other financial goal that you have, for example, people still will contribute to their retirement accounts, but sometimes they will drop it down. This is something that my husband and I did as well drop it down to enough to get the match so that they have more money available to focus on these other goals that they have. I think that that is a completely personal decision just like everything else within personal finance. It depends on what you want to do your preference. It says, et cetera. But that is like part of the point that I’m making is like you don’t have to completely stop contributing to retirement, continue to contribute. But maybe you don’t contribute as much, right, that’s not a focus for you, the focus is on these other goals that you have. Another example of that is some of my clients decide to do kind of sinking funds. So a big one tends to be the holidays at the end of the year. So rather than taking money from their cash flow in November, December, though, holiday time, they will decide I’m going to set aside this amount of money each month in a separate savings account. So that come the holiday time, I’m able to just pull that money out and spend it and I don’t have to worry about it anymore. And so again, if that is something that you want to do, I’m not saying that you have to stop contributing to your sinking funds, in order to focus on getting your emergency fund together. But the focus here is going to be on building your emergency fund, rather than I’m putting some money in the emergency fund. And then I’m also trying to pay off this credit card. And then I’m also going to be saving for a house, right, it’s, that’s what I mean, when I say focus on the goal that is most important to you. So for most of my clients, that initial goal is building the emergency fund, they determine the amount that they want to save. And if they’ve already got some savings, great, then they’re able to just add to it. And then once they’ve achieved that goal, they might have another goal. So I mentioned one of my clients is planning to buy a house. So we determine Okay, how much do you want to spend on the house, that means that this is the downpayment amount that you want to have. And then she’s focusing on saving that amount for the downpayment, she’s got the emergency fund already set, and then she’s working on saving that downpayment. And so then you’re able to focus make a lot of progress on the goal that you have. And you don’t have to worry about like all of the different pieces. And oh, I don’t have enough to do this. And you’ve got too many competing priorities, which is something that we talked about on one of the coaching calls, right, you’ve got the one thing that you’re focusing on, and you don’t have to worry about feeling overwhelmed by trying to do too many things at once. Alright, so where are you putting the savings, when we’re talking about an emergency fund, and short term savings goals, like the holiday fund or saving for a house or a new car, or whatever it is, you want that to be in a very boring account. Sometimes I see people try to put their emergency fund in investments, like try to get a return in the stock market. And you don’t want to do that because investments fluctuate, right, they can go up, but they can also go down. And so there’s risk involved there. And that’s part of why there is a greater opportunity for a greater return with investments versus a savings account. But you want to have your emergency fund and your short term savings in a boring savings account that you don’t have to worry about the balance being like half when you’re ready to pull it out, right. I always tell my clients about online like high yield savings accounts, because they tend to provide a little bit greater return than the typical savings account at a brick and mortar bank. So that is something that you might think about, if you are worried about getting a higher return, it’s still not going to be you know anything near what you would get in the stock market. But you can get a little bit more if you put your money in a high yield savings account. And if you are the type to move money from savings to checking and spend it, then another benefit of putting your money in an online account is that there is typically like a three to five day wait period, when you transfer the money, it might be a little bit less than that. But there is a waiting period when you transfer the money. So it’s not going to be instantaneous. But that is also a bit of a deterrent so that you’re not just moving money from savings to spend it the way that you can like when you instantly move it from your say Bank of America savings to your bank of america checking. So that is kind of an overview of saving. I encourage you like I said to set a savings goal to know what you’re saving for you don’t want to just be saving a pot of money to save it. Decide how much you’re going to have for your emergency fund beside how much you’re going to have for a down payment for a house or for you know, holidays or vacation or whatever it is because then once you’ve got that goal set, then you know what you’re aiming for and you can make a plan for how to get there. So I hope that is helpful for you. If you have any questions, please feel free to drop them in the group and I will talk to you later. I hope you enjoy that training. savings is such an important part of your money plan. It can be the difference between an annex expected expense, throwing your finances off completely, or it just being a simple inconvenience. Do not wait to get your savings in order. And if you need help implementing the things we just talked about, head to rho thomas.com/call. And let’s talk about how we can work together. All right, that is it for this week’s episode. Come connect with me over on social media. You can find me most often on LinkedIn, rho, Thomas, and Instagram at I am rho Thomas. Subscribe to the show and leave a review, both of which help more people to find it. And please take a second think of a friend or two that uses information and share the episode with them. As we close out friend, I pray that you take the information you learn here, apply it in your life and open up to the realization that wealth is available to you. As you do that consistently. Week after week, you will continue to take steps to regain control of your time, build wealth, and live the life of freedom and choice you deserve. Talk to you later.