How to Plan My Long-Term Savings?

Planning your long-term savings goals is a crucial part of your financial stability. But if you're wondering how to find a savings balance, you're not alone. Many of us struggle to figure out which goals to save up for first — and which ones can go on the back burner. In this article, we'll walk through what long-term saving is, and how to prioritize it.

What is Long-Term Savings?

Long-term savings goals are more time-intensive than other financial objectives because they can take decades to realize. How do you know your savings plan is long-term rather than short-term? Consider long-term savings any goal that will take five or more years to stockpile.

Things to save up for long-term can include funding your retirement, paying off your home, saving for college, or launching a business. Also, it could involve things like saving up for a down payment or a dream vacation — the targets are completely up to you.

How to Plan Your Long-Term Savings

Like anything worthwhile, planning your financial goals takes time. It requires a lot of thought and decision-making on your part. There are several steps you can take toward starting your long-term savings plan.

Write Down Your Long-Term Savings Goals

Figure out what it is that you want to save for. Retirement and emergency fund goals should be top of mind. But if you are on track with both of those, you can start to consider alternative savings. Are you going to need a new car in five years? Do you want to pay down your mortgage? Whatever it is that you're aiming for, write it down.

Creating a physical list that you can refer back to can help you stay on track. There's something about seeing a goal in writing (or on a screen) that makes it feel more real. Also, it can help you organize your thoughts if you have several competing savings goals. 

Determine How Much You Need to Save

Finding the total amount of funding you'll need in the end for your goal is the first step toward achieving your financial objectives. Your savings goals will determine how aggressively you'll need to stash away cash. The more money you need in the end, the more you'll have to set aside each month.  

There are many ways to calculate the total you need. If you're looking to increase retirement savings or reduce debt, the Savings Fitness Worksheets provided by the U.S. Department of Labor can help you with your calculations. On the other hand, if you're saving up for a specific thing — like college tuition or home improvements — you'll need to estimate the total cost of the item. Be sure to account for inflation.

Nail Down a Timeline

Once you know the total cost, you can figure out when you can afford to complete the goal. Do this one of two ways: By choosing your ideal end date or by choosing the end date you can afford.

For example, let's say you want to put $100,000 in your retirement account over the next 10 years. After doing the math, you realize you would have to put away an additional $10,000 a year, or $833 a month, to meet your goal. If you can manage that amount, great. If you realize that's too much for you, you can choose to adjust your overall goal or your timeline.

Open a New Account

Reaching goals is easiest if you can see your progress in black and white. Rather than keeping all your cash in one account, consider opening a new savings account for each goal. Or you can keep one savings account for all your goals and track your progress toward each of them on a spreadsheet.

Either way, the most important thing is to have money saved and money to spend separated, otherwise, you'll likely be tempted to spend your savings.

Automate Your Savings

Once you know how much and by when you're aiming to save, it can help to put things on autopilot. This strategy can include contacting your retirement provider and having them automatically withdraw a specific amount once or twice a month.

Additionally, you can set up recurring transfers from your checking account into a separate account dedicated to your emergency savings or your down payment fund — whatever you're saving for. With an app like Monorail, you can automate savings for your shopping wishlist and your short-term goals.

Review Your Goals Often

You'll want to take a look at the progress you're making toward your long-term savings goals at least a few times a year. Make sure that the goals still make sense and that you're going to meet them on time. You can consider whether your timeline has changed, as well, and figure out if you need to up the amount you're saving or can decrease the amount going toward that goal each month. Catching any diversions in your plan early will help you be able to save over a longer period and will make a smaller dent in your daily finances.

What Are Your Long-Term Saving Options?

You'll likely have to save for long- and short-term goals at the same time. After you cover your basic living needs, you have several long-term savings options. You'll first want to move on to retirement and emergency fund savings. Saving for both at the same time ensures that some of your money is working for you in the stock market but some is available when you need it. If you have an employer-sponsored retirement plan, you can set it up to increase incrementally over the next year so you don't feel the burden of increasing your savings all at once.

Opening a certificate of deposit account for a long-term goal can be a great option. You can't access these funds until the holding period ends — called the maturation date — but your interest rate is typically higher than a regular savings account. If you're looking to start a college fund for a child, look into opening a 529 Plan for your child's education.

Another long-term savings option comes in the form of lowering your interest payments, which can save you big at the end of the day. Try to pay off your highest-interest debt first, like credit cards or personal loans. Then move on to student loans or car payments.

Save Up For The Journey Ahead

Your long-term savings goals depend completely on what you want to accomplish in your life. If you want to buy a house, plan for that. If you want to retire early, plan for that. Whatever you're aiming for, the Monorail app could help you get set up to achieve your goals.

See how your goals would work with Monorail.

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