Dynamics of Targeted-Savings

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Now that we have extensively dealt with personal finance goals, there is need for us to go a step further and elaborate on the concept of targeted-Savings.  Targeted-savings is one of the best anchor of achieving personal finance goal without debt.

I will like to define Targeted-Savings from the two words that make it up: Target and Savings.

Target: To elect as an object of attention or attack a midst many options.

Savings: The money one has set or put aside, especially through a bank or other official scheme.

Putting the two together, Targeted-Savings is the saving meant for a particular purpose. It is easier to save with this method as the cost of what is to be done and the time line involved is known. (From our post on Personal Finance Goals, we discovered the three tiers of goals: Short- term personal finance goals, Mid-term personal finance goals and Long-term personal finance goals (Get it here)).

 I remembered while growing up, a few friends and I used this method to buy cloths and boots back in the days.

We pay to the shop owner in bits and once you pay half the price you pick one leg of the boot and after you balance up, and get the second leg of the boot. And this same principle has helped me well to achieve my Capital expenditures which can also be applicable to you.

I must however say a few principles must be followed:

·         Know the total cost of the project you are embarking on. For every personal finance goal attached a cost to it. And this cost should not be estimated as much as possible, do a market survey and add a 10%-15% to the cost as a contingency plan, as I personally do not like financial surprises.

·         Determine the time frame from the goal you have set e.g.  Short, Middle or Long term arrangement as this will help you know how much you need to save on a monthly basis.

·         Divide the total cost for the project by the set time; this gives you the amount you need to save up. Example you need to buy a Car worth 2 million Naira and it’s a middle term goal (2 years to achieve it) you make the cost 2.2 million. It comes to saving 91.666.67 every month for the next 24 months.

·         Keep the money in a dedicated account; I use a mutual funds account and my baby’s account. Where I don’t  have easy access to the cash. You can do ‘Ajo’ (Monthly contribution, like thrift among friends. This is good for short term goals.)

·         Be focused and determined in achieving your purpose. It takes determination not to spend the money and you need to keep your eyes on the ball.

·         Review the cost of the project periodically. This is will help you know the current market price of your goal.

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I must stress that you do not need to over stretch yourself even though it is inevitable to achieve financial freedom that we dearly desire.

And I want to challenge you to try this Targeted-Savings out, do it for a smaller project first and it will really encourage you to do more and get the best out of life.

Feel free to share the blog with friends and in case you have any question, feel to ask as we all thrive to achieve financial freedom.