How To Save for Your Long-Term Financial Goals: 8 Things You Should Do Now

fizkes / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Saving for the future can seem like an insurmountable hurdle, especially when you’re just trying to hang on until the next payday. Having long-term financial goals is the best way to get to where you want to be in life, even if it feels like you’re just inching toward them.

Quick Take: Long-Term Financial Goals

Generally speaking, setting a long-term financial goal means one that you want to achieve in five years or longer. By contrast, a short-term financial goal might be one that you hope to reach in a year or two, and a mid-term goal might take two to five years. Here are a few key takeaways: 

• A common long-term financial goal is saving for retirement. Depending on the stage of life you are currently in, you also might be thinking of long-term goals such as funding a child’s education or buying a home. 
• Long-term goals can also include buying a vacation home, starting a business or taking a big trip.
• Planning for your long-term financial future is essential for achieving financial stability and security when meeting your life goals in the long run. 
• Whether you’re investing in retirement, paying off credit card debt, saving for a down payment for a home, creating an emergency fund or putting away money for your children’s education, taking the right steps now can make a significant difference in your personal finances. 

8 Ways To Achieve Long-Term Financial Goals

It’s said that setting goals without a plan is just a wish, and that’s no way to achieve financial independence. It’s critical to make a plan. Here are eight ways to save for your long-term financial goals.

1. Create a Budget

Write down how much you spend each month on necessities, like your rent or mortgage, utilities, food, transportation, etc. Then go back over your debit and credit card statements for the last year to see how much you spent on discretionary items, like dining out, gifts, entertainment and so on. By developing a detailed budget that outlines your income, expenses and savings goals, you can track your spending to identify areas where you can cut back and allocate more funds toward your savings.

Decide how where and how much you can trim so that you can put money toward your savings goals. Make sure it’s an amount you can live with, because if you’re too strict with your spending you might be tempted to just give up.

2. Start With an Emergency Fund

If you haven’t already started an emergency fund, do this right away. You should have three to six months’ worth of expenses in a savings account for emergencies. This sounds like a lot, but it’s necessary for two reasons.

1. It will give you the funds you may need if there’s an emergency, such as if your car needs to be replaced or you lose your job. Without an emergency fund, you could find yourself having to pay these expenses with a credit card, which means you’re paying ridiculously high interest.
2. Having an emergency fund gets you in the habit of saving. You’ll probably need to cut back somewhat to sock away that much cash, so you’ll need to determine what’s important to you. Once you do that, you’ll be putting some money into your emergency fund every month.

Make your money work for you

Get the latest news on investing, money, and more with our free newsletter.

Submit

By subscribing, you agree to our Terms of Use and Privacy Policy. Unsubscribe at any time.

Thanks!

You're now subscribed to our newsletter. Check your inbox for more details.

Once you have six months of savings, you can start putting that same amount of money toward your long-term goals.

3. Eliminate Your Debt

High-interest rate debt, like credit cards, is a big deterrent to reaching your financial goals. If you are carrying a balance on your credit cards, start paying it down aggressively, as soon as you’ve built your emergency fund.

Look at it this way: If you are carrying a balance on a credit card that is charging you 24% APR interest, paying it off is like getting a guaranteed 24% on your money. Who wouldn’t take that deal?

4. Pay Yourself First

When you made your budget, you came up with the amount you wanted to save toward your goals. Treat this amount as you would any other necessary obligation, like your rent or utilities. Pay your savings before you spend on anything that’s not an absolute necessity.

Paying yourself first means you also start by defining your long-term financial objectives. Determine how much money you’ll need and when you’ll need it. For example, if you’re putting your paycheck into your retirement account, calculate the amount you’ll need based on your desired retirement age, lifestyle and expected expenses.

5. Save Your Raises and Bonuses

As time goes on, hopefully, you will get increases in your salary, and you may get a bonus or other windfall. When this happens, instead of splurging on a big celebratory purchase, increase your savings amount by at least half of the amount of your raise or bonus.

Prices go up, and you do need to reward yourself some time, so it’s unreasonable to expect that you’ll put 100% of every raise toward savings. But squirrel away at least half, as soon as you get it.

6. Utilize Tax-Advantaged Retirement Accounts

Take advantage of tax-advantaged retirement accounts such as 401(k)s, IRAs or Roth IRAs. These accounts offer tax benefits that can boost your savings over time. Maximize your contributions to these accounts to benefit from compounding growth and potential employer-matching contributions.

Good To Know

You should diversify and spread your investments across different asset classes outside of retirement accounts with stocks, bonds, real estate and mutual funds. Diversification can help reduce risk and enhance long-term returns.

Consider seeking advice from a financial advisor to create a well-balanced investment portfolio based on your risk tolerance and goals.

7. Automate Your Savings

Set up automatic transfers from your paycheck or bank account to your savings and investment accounts. Automation ensures consistent contributions without relying on manual efforts, helping you stay disciplined in saving for your long-term financial goals. 

You could try breaking your paycheck into percentages such as with the 50/30/20 rule which has you automatically allocate 50% of your funds to needs, 30% to wants and 20% to savings.

8. Stay Disciplined and Patient With Your Finances

Saving for long-term goals requires discipline and patience. Avoid impulsive financial decisions and stick to your savings plan even during market fluctuations. Stay focused on your objectives and remind yourself of the long-term benefits of consistent saving and investing.

It is also good practice to consistently review your financial progress and adjust your savings and investment strategies as needed. Life circumstances, market conditions and financial goals may change over time, requiring adjustments to your plans.

Power of Compound Interest: Why You Should Start Now

The most powerful savings tool you have is time. The sooner you start saving for your long-term financial goals, the better off you’ll be.

The reason is simple: compound interest. When you put money into an account that earns interest, and you leave it there, you will get interest on the money you deposited. Eventually, you will get interest on that interest, too.

How Compound Interest Works

Here’s an example. Suppose you put $100 in a savings account that earns 5% APY. At the end of the first year, if you don’t put any more money in, you’ll have $105. If you leave it in there for another year, how much will you have? 

You may say you’ll have $110, but you’ll actually have $110.25. And the year after that, you’ll have $115.76. This might not seem that big, but if you’re continuing to add to your savings, it can really add up.

Final Take To GO

The bottom line is that the amount of money you save is less important than when you start. The earlier you start, the more time your money has to earn interest for you. Don’t wait until you think you have enough money to start saving. Take small steps towards what you can save today and add to it when you can — think of it as making minimum payments on your future. That’s the best way to make progress toward your long-term financial goals.

Caitlyn Moorhead contributed to the reporting for this article.

Share This Article: