How to Prioritize Your Savings Goals for 2020
Jan 29, 2020
Last month, we talked about setting your New Year’s Resolutions for 2020. While goal setting is a great first step, it shouldn’t be your only step. Survey after survey shows that while Canadians are good at setting New Year’s Resolutions, we’re not so good at actually keeping them. But don’t despair. We’re going to share some tips with you on how to keep the New Year’s Resolutions that you set.
Here are five steps to help you prioritize your savings goals for 2020.
Step 1: Put Your Goals on Paper
If you’re like most people, you’ve probably set New Year’s Resolutions for yourself. While setting goals for the New Year is a good first step, if you’re really serious about achieving your goals, you’ll want to write them down on paper.
It’s a good idea to break your goals down by timeline. For example, a short-term goal could be saving for a family vacation, a mid-term goal could be saving enough money to contribute to your child’s RESP to pay for their education and a long-term goal could be saving enough to retire early at age 55. Try to add a dollar amount to each goal to make them even more tangible.
Step 2: List Your Goals in Order of Importance
Once you’ve written your goals down on paper, further categorize them in order of importance. For example, establishing an emergency fund is highly important, since without an emergency fund, you could find yourself in a lot of high-interest debt if a financial emergency were to occur. Saving for your child’s education in an RESP should also be a high priority goal and appear near the top of the list.
Step 3: Choose the Right Account Type
A priority should also be to find ways for your money to grow. Putting your savings in the right type of account is the simplest way to do that. For example, if you’re saving towards your child’s education, you could put the money in a regular savings account, however, that wouldn’t be a wise decision. If you instead put the money in an RESP, you’d be entitled to the 20% top up grant from the government and your child’s money would grow tax-free. As you can see, choosing the right account type can really go a long way.
Step 4: Break Your Savings Goals into Monthly Goals
If you want to receive the full $500 government grant, you’ll need to contribute $2,500 to your child’s RESP in the year. This is often easier said than done. Coming up with $2,500 all at once is tough. Luckily, you don’t need to do that. By breaking your yearly goals into monthly goals, it makes them a lot more realistic and easier to achieve. For example, you’d need to contribute $209 to your child’s RESP each month to receive the full government grant. If you’re paid twice a month like most people, you can break it down further and plan to automatically contribute $104 per paycheque. By automating the savings, you’ll barely notice the money is gone.
Step 5: Track Your Progress
The fifth and final step is to track your progress. While you don’t need to check in every minute, by tracking your progress on a monthly basis, you’ll make sure you’re on track to accomplish your goals. If you need to make adjustments, you can do so as well.
By tracking your progress, you’ll hold yourself accountable and keep yourself motivated as you move closer towards accomplishing your goals.