Following last week’s post, you have more familiarity on what and emergency fund is and its importance. One of the key takeaways from this is to be able to plan ahead by putting aside an agreed amount unexpected events. 

If you don’t have a plan, then you wouldn’t have any idea to tell whether you are on track, or need to take the reins and be in more control of your finances. Without a plan, you’re navigating blind with your personal finances – this can lead to big surprises the next time you check your bank account or you get that next credit card bill.

Remember, the financial decisions you make now will have an effect on your life in the future, both in the short and long term. I reckon we could all think back to that one time we made a bad decision (whether that’s financial or other) and it’s changed our lives for the worse. 

A savings plan is not a “one size fits all” concept – it must be tailored to your own needs, goals and values. The first question you need to ask is “What do I want to achieve?” Think about it, the things that you want out of your finances are probably different to one of your friends or colleagues. You might want to be saving money for your next getaway in the Bahamas, whilst a colleague has been eyeing that rare collectable figurine. If you’re building up your Emergency Savings Fund then you might to create a goal for that as well! Knowing what you are saving up for is a great starting point, and can be developed with more clarity using the S.M.A.R.T framework:

• Specific – Clear and specific goals enable you to focus your efforts on exactly what you want. 
• Measurable – Having measurable goals enables you to track your progress quantitatively, which helps you stay motivated. If something is measurable, it is an indicator that you have accomplished it.
• Achievable – If you want to be successful, your goal needs to be realistic, taking into account your personal situation.
• Relevant – The goal has to reflect your ability and resources to achieve the specific outcome you want.
• Time bound – A goal needs a definite deadline to work towards, else your goal may just get pushed to the wayside in lieu of your other day-to-day activities.

My goal is to travel to Japan for 4 weeks in November 2021 (approx. 18 months away). Doing some budget for flights, accommodation, food and spending money, I need to save $4,500. This should be achievable for me as I am working full time and I generally have some money left over after all expenses are accounted for. Doing the numbers, I will need to save around $250 per month for the next 18 months.

• Travel to Japan for 4 weeks in November 2021 (Specific, Time bound)
• I need to save $4,500 (Measurable goal)
• Working full time (Achievable)
• Save $250 per month (Realistic for my situation)