Just got to thinking...
Every month we do our round-up of the past month’s goals… check off how we did, and make new goals for the next month. And a lot of folks make long-term (annual) savings goals for themselves. But are these the right time horizons?
Studies have shown that people who think they’re saving for the next month think they’ll save LESS, but actually save MORE. And the people who think they’re saving for four months away think they’ll save MORE, but actually save LESS.
Implication: Short-term goals are more motivating, actionable, and set you up for success.
But what is the BEST short-term time horizon? Is it a month... or a week? Most of our financial transactions (housing, utilities, credit card payments, etc.) group up into a month’s time span, so that makes sense why we default to the month. But I’ve been noodling over whether it makes sense to have ANY shorter term goals as it relates to other expenses. After scanning my expenses, the only thing I’ve come up with is ‘eating out’ costs. The last time I tried to budget by week on my eating out costs I didn’t do very well. I tend to spend my budget in four big outings, rather than space them out over the month with more economical dinners. So maybe I could split my savings in two and try to budget over two week periods there.
Another area I haven’t really touched yet is the money I spend on food and other items at work when I use my employee badge. To date, I haven’t really worried too much about how much I’m spending on my card. It’s usually small dollar stuff on things like food. I could try to institute a weekly cap on my ‘badge spending.’ That would definitely work… although I don’t like the sound of it!
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2 comments:
I've read that yearly budgeting is more accurate than monthly budgeting, because when planning longer-term people remember the expenses that are not every month but will happen a couple times a year (property taxes, car repairs, etc.). I think monthly saving goals are good (if only you can check them off sooner!), but a yearly saving goal will help you keep your eye on the bigger picture while allowing you some flexibility in month-to-month spending.
Certainly fair... I think that's probably what I struggle most with in budgeting: how to "plan" for those unforeseen 3-4 times a year expenses...Right now I hold a "miscellaneous" column and it's always something.
I definitely want to add an annual goal that's reasonable! My side bar goals are more like a long-term financial "to-do" list!
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