Attaining Financial Goals

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You could choose to reach financial goals by using the cookie jar plan. It’s a popular, simple savings program. But is tossing pennies into a container the best way to save for that new car, education expenses or a vacation?

In two situations the answer is yes: 1) you don’t care how long it takes; or 2) you’re expecting to receive a cash windfall.

If neither describes your circumstances, attaining your objectives is going to require a bit more work than a wish and a coin flip.

Here are four questions to ask before another penny hits the jar.

  • What is my goal? Figure out what you’re saving for. Here’s your chance to dream about the “if onlies.” Did you come up with more than one goal? Make a list, in order of preference. Then apply the next three questions to each item, starting at the top of the list.
  • What’s the total price tag? Sure, an estimate would work. But why not spend a few minutes exploring the world wide web? Besides having some fun, you’ll get a more accurate number. Research the cost of that car. Check out the fee per credit hour at community colleges and universities. Investigate hotel and airfare rates for that dream vacation.
  • How much time do I have? Is your clunker falling apart, or can you drive it another year or two? When will the baby be packing for college? What’s the best time of the year to take that vacation?
  • How much do I have to set aside each month? To arrive at a figure, you could simply divide the total price tag by the time you have. But if you plan to put your money to work for you (instead of letting it loaf in that cookie jar), you’ll be earning interest, paying taxes on the earnings, and dealing with inflation. So the simple calculation might not be very useful. Fortunately there’s another easy solution—free financial calculators on the Internet. Find one, estimate the rate of return you expect, plug in your answers to the questions above and let the computer tell you the amount to save.

Now you’re on the way to reaching your goals. You can dump out the cookie jar, wrap those coins and deposit them in your newly established “financial goals” account. All you have left to do is review and adjust your plan if circumstances change.

Oh, wait, there is one other thing. You might want to refill the cookie jar—with cookies this time, so you can enjoy the sweet taste of success.

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