How Much Should You Save Today For Your Goals?

What’s the first thing that comes to your mind when you hear the word saving?

Piggybank. Right? Or it’s the more realistic version, a bank.

But saving is much more than just depositing your monthly salary in a bank account and spending the money whenever you feel like it. Truth be told, you should not spend your money every time you spot something cool. So, for the little spendthrift in you, let’s first jump onto understanding the Importance of Savings. Learn how to set financial goals in Dubai UAE in this article.

Importance of Savings

While saving can feel like an unpleasant task to do, it can give you long term security, financial independence, money for emergencies, education, and help you with your long-term life goals, like, dream car, home, marriage, lifestyle, etc.

You might have heard about the 50/30/20 budget rule. Take 50% out for living expenses, 30% for lifestyle expenses, and 20% for savings from your monthly salary. But is that enough? Or to ask a more specific question, is that enough for you?

The answer lies in your financial goals. Yes, the amount you should save today highly depends on what you want to do with it tomorrow aka your financial goals. Establishing Financial Goals is the first task to do in the journey of learning how to handle finances. Savings comes second.

So, let’s do the first task at hand and go through a quick guide on How to Set Financial Goals.

How to Set Financial Goals?

Setting financial goals sounds like a complex task. It is not easy as pie but not complex as rocket science either. First, let us break it into three simple steps i.e. setting short-term, midterm, and long-term financial goals. As you can see, the categories are divided based on time.

1. Short-Term Financial Goals

These goals mostly revolve around your monthly expenses and you only need a small amount of time to get started.

• Establish a budget– Start with tracking your previous expenses. And based on your income and expenses, set a clear boundary between how much money you can spend on needs and want.
• Create an emergency fund– Put a particular amount aside only to be used in case of emergencies, it can be any unexpected expenses like medical emergency, unemployment, etc.
• Pay off credit cards– The last thing you want to do is suffer in debt. Never let your credit card bills pile and pay them off as soon as you can.

2. Mid Term Financial Goals

Now, let’s move on to some bigger financial goals that can take up years of savings to achieve.

• Get life insurance and disability income insurance– Life insurance is necessary in today’s unpredictable world. Find a suitable policy as per your insurance needs and keep some money aside for the instalments.
• Pay off student/mortgage loans– Paying off student or mortgage loans can seem daunting but with consistent efforts and intelligent planning, it can also become easy.
• Consider your dreams– We all have dreams like buying a car, building our own house, having that dream wedding, etc. Think hard and find out your dream goals.

3. Long-Term Financial Goals

These goals may almost take up most of your life’s savings and demand consistent efforts to achieve.

• Estimate your retirement needs– Think about your lifestyle, family, and responsibilities in your retirement days and plan accordingly.

Now, you know how to set your financial goals. So, let us come to the main question here, how much should you save today for your goals?

Also Learn: How to Make More Than $13,000 By Saving Just AED 500 a Month

How Much Should You Save Today For Your Goals?

The amount you should save every month depends on three elements-

• How Much Do You Need?

To fulfil all your financial goals, find out what is the exact amount of money you will need to save every month. The number may not match with what you can afford to save right now but you can always start small and increase it gradually.

• When Do You Need It?

Break down every goal in time intervals and find out when you will need the money. For example, if you want to buy a car in five years, you will need your car money after five years. It will help you decide where you can put your money to get it back at the required time.

• What Is The Approximate Expected Return?

The return rate will determine the amount of money you should save and the time it will take to reach your goals. The higher the return rate, the lower the time and money required to get the same amount.

Now, you know how to set your financial goals and how much you should save. But the story is not finished yet, there is one more step in learning How To Achieve Financial Goals. So, let’s end this puzzlement with the final question.

How To Reach Your Financial Goals?

In a normal scenario, if you save your money in a bank account, you will get a max to max 2% return rate on your savings. Sounds good! But if you look at the statistics, the UAE records an inflation rate of 2.5% in 2021.

The numbers just don’t add up. If you keep your money only in the bank account, it will lose its value, let alone help you achieve your financial goals. Then, what to do, How To Achieve Financial Goals?

The answer is investing. Saving and investing go hand in hand when it comes to wealth creation. And the key reason is compounding.

Keeping your money in the bank will give a return on the money you saved, but with investing you can reinvest the returns you earned on your money and eventually grow your money with the help of compounding.