Savings goals are great because they give us something tangible to work towards, especially during those periods of life when things get tough.

But with so many of our dreams and ideas bound by what we can afford, it makes sense to be pro-active in managing our personal finances, so we can make those visions a reality.

The following guide provides a step-by-step approach towards identifying, prioritising and achieving savings goals:

Step 1 – Create A List Of Your Saving Goals

With pen and paper, start making a list of all the things that you want in life, regardless of how big or small, realistic or unrealistic they are; don’t hold back, just let your creative juices flow.

Some goals can be described in a couple of words, for example ‘fast red sports car’, whilst others may need to be described in a short paragraph or two.

Don’t worry about covering all of your goals in one go, as you can always update your list at a later date, in fact I guarantee you will be updating it as more ideas come into your head!

Step 2 – Assess & Prioritise Your Goals

I am an incredibly strong believer in prioritisation and prefer focusing on doing one or two tasks really well, rather than taking a scatter-gun approach and trying to achieve too many tasks with limited effect.

The same is applied to savings. By prioritising savings goals and focussing on the highest priority, it is possible to achieve that goal in half the time than it would take when saving for two goals at once.

So taking all of the goals that you have written down, start listing them in order of priority, starting with the highest priority first:

1. Highest priority goal
2. Second highest priority goal
3. Third highest priority goal
4. Fourth highest priority goal
5. etc
6. etc
7. etc

It is probably best to do this on your computer using Word or Excel, so that you can move the priorities around and add to them in the future.

A Tip To Help You Prioritise

Setting priorities is actually a pretty tough exercise and I’ve seen many people in business flummoxed when they are told they can only have one activity worked on in the available time and need to make a choice over which activity it will be.

The same applies in our personal lives. The choice between saving up £15,000 to spend on a wedding or to spend the same on a house deposit is a difficult one for many people to make.

Ultimately we can’t hide from making these important decisions, but the decision can be helped by considering the following the following:

• Cost of the goal
• The deadline for achieving the goal
• Financial return on investment
• Emotional return on investment
• Is the goal a ‘must-have’ or a ‘nice to have’?
• How viable or achievable is the goal?

Step 3 – Creating A Plan For Your Highest Priority Savings Goal

Assuming that the highest priority goal is a deposit for a house and that the wedding will need to take a backseat for a couple of years, the next step is to create a plan for saving up the deposit.

The plan is very simple:

• Goal Value – £15,000
• Timeline – 2 years
• Meeting this goal within the defined timeline will require £625.00 to be saved each month
• Check your budget to ensure you can afford to save that amount of money each month, without going into overdraft
• Set up a direct debit to a high-interest savings account or tax-free cash ISA, ensuring the money gets paid out at the start of the month, so that you don’t spend it!
• I always prefer separating my savings from my current account, as it places a psychological block on me wanting to access the savings account and spending the money. All banks offer a variety of savings accounts, with some offering multiple-savings accounts for those with a couple of different savings goals.

Step 4 – Tracking Your Savings Goals

Tracking savings goals is just as simple as the planning. I use my budget to note my savings goal and update progress against it each month, once the money has left my current account and gone into my savings account.

I’ve seen adverts for banks providing some nice visual tools that show you how your savings are progressing, but I wouldn’t let that sway my decision on the choosing a savings account as it is just as easy to provide the same visuals in Word or Excel.

Some people like to have more detailed plans, involving quarterly progress checkpoints, interest rate calculations, inflation rate calculations and all sorts of other checks and balances, but to me this is just overkill. I prefer to keep things simple and spend as little time administrating my finances as possible!

Turbo-Boosting Progress Towards Your Savings Goals

Unlike borrowers, savers are rewarded by compound interest, which left year-on-year can make a big difference to the money put by – see the first rule of financial freedom.

Unfortunately with interest rates so low at the moment, it is difficult to get a decent rate of return, but it still makes sense to search for the savings account or ISA that offers the best deal.

Normally the best savings deals require, savers to move their current account to another bank or be unable to access their money for a given amount of time.

This might be a good idea for large scale savings (such as a house deposit), but for something like an emergency fund, it is no good having to wait three months to access your money. So taking into account all of the factors, before deciding who to entrust your savings to.

Another option to consider is the stock market, which provides a greater potential to achieve higher returns on your investment – see the seventh rule of financial freedom. Again you will need to weigh-up the benefits of a higher return against the potential risks of trading on the stockmarket.

A third option is to simply find additional cash to add to your savings, helping you to meet your targets quicker. The extra money could come from cutting costs in your spending or increasing your income. Here are three ways of increasing your income:

• How to Convince Your Boss that Giving You a Pay Rise is an Absolute No-Brainer!
• How I Increased My Salary By 20 Percent
• Who Else Wants a Profitable Sideline Business?

What To Do If Your Savings Go Off-Track

It is important not to forget about the impact of unexpected problems that can easily throw saving plans of track. Getting a mechanical problem fixed on your car can easily swallow a couple of month’s worth of savings.

When issues occur and savings do go off-track, it is important not to stress too much, but simply assess how much you missed your monthly targets by and re-plan.

You might extend the timeline by which you need to hit your savings target or find ways of increasing the amount you have each month until you are back on-track.

And If Your Priorities Change?

Unexpected changes in life can also impact the goals you are saving for. How many couples have put their future plans on ice, when they have found out they are going to be parents? Foreign travel and fancy cars are pushed way down the priorities list, replaced by nurseries and baby accessories!

Again, as with any change of circumstances, it is just a case of analysing what is required, how much you have, what you need to save and putting a new plan in place to achieve it.

Balancing Short, Medium & Long Term Goals

People will have different goals for different stages in their lives. For somebody in their mid-twenties, retirement is a long way off and a more important goal is to buy their first home, so that they don’t have to share with several housemates any longer.

But with personal finance, it is important to take a more strategic view and make plans for the future. At the age of 25 you have got your life well and truly ahead of you, but within just 10 years things will have changed, with a mortgage, marriage and kids to account for.

And just another 20 years after that, your plans and thoughts on retirement will start to become much more relevant as the working part of life begins to draws to a close.

Whilst you may not know what you will want to do with your retirement years, there is one certainty and that is you will need money to pay for it, so some of your short-term goals will need to be balanced by medium and longer-term goals that you need to save for, but may not have fully thought out yet.

This may sound like it contradicts my point about prioritising and focusing on as few saving goals as possible, but it is wise to temper short-term requirements with those of the longer-term.

Money spent on products like cars and electronic consumables that quickly depreciate in value, could be saved and invested for future use and is one of the factors that needs to be considered when prioritising savings goals.

Here is some further reading on longer term wealth building:

• The Wealth Grid
• The Rules of Financial Freedom
• Why I Have a Pension
• Grow Your Wealth by Buying the Right Sort of Assets

Don’t Forget Ongoing Savings

Ongoing savings is the term I use to cover money that I save each month so that I can pay off certain bills in full and avoid credit charges, a good example being car insurance.

This also covers my emergency fund, which whilst being far from the three months salary-equivalent that most financial experts recommend, does give me some coverage for smaller problems, without having to dip into savings or rely on a credit card.

Just like long and medium terms goals, if you choose to keep ongoing savings, you will need to balance them against your prioritised savings goals.

The best tool for making these types of decisions is your budget, which will show you exactly how much money you can afford to save each month.