It’s hard to save, or rather, you won’t save, if you don’t have specific goals that you’re working towards. I break goals out into three categories:
- Short-term goals: Immediate or near-term wants or purchases. Perhaps a new appliance or gadget (our current short-term goal is to finally enter the HDTV fray), or maybe a fairly inexpensive vacation. As these are usually under or around $1,000, I try to fund these quickly out of my bank savings account by seriously tightening up for a few months and “absorbing” the cost from a cash-flow standpoint.”
- Intermediary goals: Larger and usually further out, the sort of goals where time is on your side to plan for, if you’re smart about it. I consider my eternal quest to keep upping my emergency fund an intermediary goal, building it up slow and steady. My wife and I are discussing plans to finally take a honeymoon for our 10th anniversary in 2011. We’ve settled on Italy, and our goal is blow it out while basically “paying cash” for the trip.
- Long term goals: Exactly what you think. And for most of us, that means saving for retirement. I’ve attempted to put a face on my retirement as much as possible, even though it’s probably 30 years away and subject to change, and more change, and so on. But for now, the plan is to retire to the life of a gentleman farmer. Having a specific retirement goal and a tangible quality; I know what I’m working towards saving for.