Next Steps after Reaching Your Savings Goal

One of the earliest pieces of financial advice we receive is to start saving early. Set savings goals and work hard to achieve them. Although it is wise to build your savings account, we often do not give much thought to the next steps after reaching your savings goal. But this begs the question, when can you say you have reached your savings goal? And shouldn’t you set another savings goal once you reach it?

Only you can answer these questions, so it is important to take them into consideration when planning for the future. Here are a few suggestions to evaluate your savings plan and decide what to do once you achieve your goal.

Next Steps after Reaching Your Savings Goal

 

The 50/30/20 Rule for Reaching Your Savings Goal

The first step is to create a plan to reach your savings goal. The 50/30/20 rule is a basic equation for people who do not like or struggle with detailed budgeting. Instead of tracking several categories, this strategy breaks your spending into three main categories: needs, wants, and savings. The actual amounts will vary based on your take-home income.

This simple approach cuts down the time you spend calculating your monthly budget. However, you still need to dedicate some time to sit down and work out the figures. First, you must determine your total monthly income after taxes. From the final amount, allot 50% for your needs. Then 30% can be used for things you want. Then, about 20% should be put towards your savings goal.


For example, let’s say your monthly take-home income is approximately $3,000. That means $1,500 would pay for your daily necessities. Be certain you are only including things you need to survive. This includes expenses for basic necessities like housing, food, utilities, transportation, health care costs, and minimum debt payments. If 30% has been dedicated for your wants, you should have about $900 available to spend. Finally, about $600 would go towards your savings.

There has been some dispute for those who live in places with a high cost of living. If food and housing are more expensive where you live, more of your monthly budget will go to your daily needs. Another point of contention is with the percentages for higher income earners.  Some argue 30% is way too much to spend on your wants. While the 50/30/20 rule is an excellent guideline, you may decide to tailor it to your finances to build your savings account or take the next steps after reaching your savings goal.

5 Steps After Reaching Your Savings Goal

 

1. Evaluate you Budget and Savings Goal

 

Keeping tabs on your finances and living under stricter spending limits helps you achieve your savings goals faster. After you create a monthly budget, you can also learn to spot negative patterns. Try to find ways to cut unnecessary spending and redirect money to pad your savings account. Those micro-transactions can really add up quickly and work against you.

If you have extra money at the end of the month, double-check your statements to make sure there were no missed payments. However, if you still have money to spend, it is time to create a plan for your next steps after reaching your savings goal.

 

2. Pay Down Your Debts

 

Becoming debt free is a common financial goal. If you have a little left over, it could be an opportunity to pay down more on the principle amount owed. There are two approaches towards tackling debt repayment; the Debt Snowball vs. Avalanche methods. Both have been highly successful in helping people become debt free, but perhaps one will be more beneficial to you. The Debt Snowball method pays off the smallest debts first to reduce the number of lenders you owe. However, the Debt Avalanche method takes on the debts with highest interest first. Whichever approach you choose, paying down debt is an important step after reaching your savings goal.

 

3. Use Your Savings to Invest

 

Another wise way to secure your savings is through investments. You can use that extra amount to buy shares in mutual funds or open supplemental retirement accounts. If you want to contribute to your family’s future financial security, you could invest in stocks or bonds for your children. With compounding interest and time, small investments can accrue into significant sums of money. When they become of legal age, they could have a large lump sum to help give them a head start in life.

Here are five of the best investing apps you can use to start saving to invest. We included the fees and minimum and what it is best for so that you have a glimpse of what these apps are.

AppFees and MinimumBest for:
RobinhoodFreeInvesting for Everyone
Acorns$1 per month
Spare change investing
Ellevest$1-$9 per month
no account minimum
Investing for the future.
The Motley Fool$99 for the first year.Stock advising

4. Look for New Opportunities

 

For some people, the next step after reaching your savings goal is to look for new opportunities. Perhaps you decide to splurge a little on yourself or use your savings for something that you enjoy. You could take up a new hobby or try an activity that was previously out of the budget. It could be the perfect time to use the funds to finally take that dream vacation or buy a vacation home at your favorite spot. You could also fund that business venture you have always talked about pursuing. Once you have taken care of all your other financial obligations, it is a good time to look for new opportunities.

5. Secure Your Financial Future

 

For others, the most practical next step after reaching your savings goal is to secure your future. First, revisit insurance policies to ensure that you are appropriately covered and your loved ones are taken care of. While you likely already regularly contribute to your retirement accounts, you can increase the amount or find new vehicles to supplement your retirement funds as well. Investing in your future is always sound advice.

Furthermore, you may want to secure your family’s financial future. If you are just starting a family or looking for more space, you could use your savings as a down payment on a home. You may also consider opening an account in your children’s name or starting a college fund for them. These are huge expenses later in life, so every bit helps lessen the financial burden.

 

What to Do After Reaching Your Savings Goal

Although it may still be a pipe dream, you should consider what you would like to do after you reach your savings goal. You cannot be in a constant state of striving for the next goal. It is important to recognize the milestones as they come. This doesn’t need to be anything extravagant, but take time to celebrate your successes along the way.

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Financial Mistakes to Avoid as a Recent College Grad

 

Mistakes to avoid financially as a recent college grad

Mistakes to avoid financially as a recent college grad

Mistakes are unavoidable, but you should be especially careful when it comes to your finances. As you prepare to graduate college, you also prepare for the “real world.” You’ve spent the last four years obtaining as much knowledge as possible in your field, applying for jobs, and writing your resume. Graduates beware, student loans are the second-highest form of personal debt. And with college debts increasing, it is more important than ever to have a smart financial strategy in place. A solid plan will help you avoid as many mistakes as possible.

By taking a step ahead of your peers in choosing wise investments, you can create healthy habits. This not only improves your personal finances for years to come but also avoid future debt issues.

Financial Mistakes to Avoid after Graduation

Financial mistakes can be easy to make, but there are ways you can avoid them.

Mistake #1: Having no credit.

Everyone talks about saving money, and we are no different. Unfortunately, all this talk about savings has college graduates a little hesitant to take out loans or credit cards. This is due to the fear of creating an overwhelming debt they can’t repay. Plus, not to mention, college already creates heavy financial obligations. Furthermore, it is increasingly harder for those under 21 to sign up for a credit card with no existing income. So, what’s a newbie to do? Build your credit history slowly and regularly by opening accounts and using your own credit cards.  Making consistent payments by or before the due dates establishes a good credit history.

Why this is important: When you want to make big, future purchases, like a house, you will have a hard time being approved for a loan. Lenders may require a co-signer or collateral if you have no credit. When I was still in college, I bought my first car with cash I had saved from my summer job. Not long after graduating, I needed to purchase a new vehicle. This proved to be a challenge due to my lack of credit. Over the years, I have been able to develop a favorable credit score by paying off a credit card and the loan for my vehicle. Had I started to build credit sooner, I wouldn’t have struggled so much to get the car I needed.

Mistake #2: Not having a plan.

Having a limited or non-existent financial plan is one of the biggest mistakes recent college grads make. As a poor college student, you are lucky if you have two pennies to rub together as you battle the choice of groceries or rent. When you land that first job out of school though, it can be easy to fall into poor spending patterns very quickly. To avoid this, cut back on unnecessary expenses like going out to eat.  Spend more time enhancing your cooking skills and spreading out your personal purchases. Instead of buying everything for your new apartment at once, budget your expenses over time. Additionally, focus on always paying bills first at the beginning of every month. Then, you know how much is still available in your accounts to last the rest of the month.

Why this is important: Money adds up quickly. So, developing these positive habits sooner can save you not only hundreds but possibly thousands per year.

Mistake #3: Waiting to save and worrying about finances later.

Consider consulting with or finding a financial mentor to help you along this new journey. Waiting to save or pay off student loan debt can cause major inconveniences in your future. Knowing where to invest savings is also tricky, but a certified financial specialist can help you. Try the Digit.co app to automatically save up and pay debts and also try to contact friends from college with a finance degree who may be willing to provide some advice at no charge as they begin their careers.

Why this is important: The sooner you start paying down those student loan bills, the better your overall financial situation. If you were to plug your debt numbers into this student loan calculator tool, you may be appalled at the time frame it will take you to pay it all off. The minimum monthly payments barely cover the interest. Plus, creating a savings account and emergency fund will keep you out of sticky financial situations.

Mistake #4: Not investing early.

Time is the greatest benefit you can give yourself when it comes to investing. Even if you are only contributing a few hundred dollars each year, compounding interest rapidly grows your investments over time. Instead of blowing any extra cash you receive, put it away to help provide some financial security for the future. Try the Robinhood app for this, this is the best app for beginner investors like you.

Why this is important: You are only working against yourself the longer you wait to start investing and planning for retirement. Even with minimal contributions, you can create a significant amount of money the earlier you begin. With a little forethought, you can provide a security net and a nice retirement fund.

By thinking about your future now, you can avoid these common financial mistakes recent college grads make. At the same time, you are also building yourself a nice, comfortable financial safety net.

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Best Online Forums About Saving Money

The first rule of personal finance is to spend less than you make in order to save. However, making financial decisions and lifestyle changes that impact your future can be overwhelming. This is especially true if you do not feel well informed or have never been taught. If you are feeling out of your depth, here are some of the best online forums about saving money. Not only will they point you in the right direction, but they will also provide community support to help you achieve your financial goals.

The Best Online Forums About Saving Money

Best Online Forums About Saving Money

Finance Goal 1: Budgeting to Save Money

Frugal Village

The Frugal Village is one of the best online forums about saving money and budgeting. You can delve into topics about how to transform your lifestyle and spending habits. The forum allows you to browse through dedicated topics and blogs or read up on the latest savings challenges. You can even join other members in taking on one of them with the support of the entire forum behind you. It offers motivation and advice to keep on the right track.

Finance Goal 2: Building Your Savings

Tip Yourself Savings App

One frequent piece of advice about budgeting is cutting out unnecessary daily expenses. While this is solid advice, it can be difficult to maintain discipline to build your saving. However, the Tip Yourself app creates a fun way to save money by making it into a game of sorts. Instead of buying morning coffee or splurging on things you don’t need, the apps allows you to pay yourself instead. You can watch your money accumulate in your personal tip jar and encourage others who are doing the same. It is a fun and alternative way to spur your savings plan into high gear.

Finance Goal 3: Paying Off Debt

Money Savings Expert

This is a very diverse and active forum that covers many financial topics. In particular, their Debt Free Wannabe has a wealth of knowledge aimed to help you pay down your debts. When you join this community, you become part of a network of like-minded people all working towards the same goal. When you have the support of an entire community, it makes the overall task of reducing debt less daunting.

Finance Goal 4: Saving Money for Retirement and Investing

Morningstar

Morningstar has a longstanding reputation as an excellent tool for investment research. Furthermore, the site’s rating system for stocks and mutual funds is universally known and utilized among the investing community. Not only is it a free research tool, but it is an excellent starting point for anyone who wants to learn more about investing strategies and the stock market. While you should seek out several sources, Morningstar is a prime resource to assist you with making major investment decisions.

Bogleheads

This oddly named forum takes its name from the founder of Vanguard, Jack Bogle. Bogleheads forums provide information and advice about long-term passive income. You can peruse through their quick links to read about trending topics or create your own threads. It is a convenient resource when making decisions about balancing your portfolio and allocating your assets.

General Advice Forums About Saving Money

Reddit – Personal Finance

When it comes to common sense advice on a broad range of topics, there is no better place than Reddit. You quickly receive down-to-earth advice in their friendly forums. This holds true even with the Reddit – Personal Finance forums. After you post your question, others who have expertise or experience with your specific situation will contribute helpful tips. While it may not be the first site you think of for financial advice, community members are very helpful in getting you the information you need.

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