Calculate your price tag and schedule

Welcome to Week 4 of the Master Your Money Bootcamp to decide what you want. This week, we’re calculating the numbers!

Exercise 4: Determine your price and your schedule

Saving money for a big purchase or event can feel overwhelming if you start with little or nothing in the bank.

By breaking down the big goal into a series of smaller ones, like a paycheck or a month, you can light a path that seems much more achievable.

The objective of this week: Calculate how much you need to save on a regular basis to reach your goals when you want them.

1. Get out your list of week two exercise goals. These should be prioritized and each should have a target date that you would like to have the money for.

2. Decide on a target number for each savings goal. For example, if your goal is to buy a new car in two years, how much do you want to spend?

3. Incorporate the numbers into the following formula and repeat for each savings goal:

Target account balance ÷ number of years until event or purchase ÷ number of paychecks per year = how much to save each time you get paid

Here is an example of buying a new car:

$ 20,000 2 years ÷ 24 paychecks per year = save $ 416.67 per paycheck

If your income is not regular, use this formula:

Target account balance ÷ number of years until event or purchase ÷ 12 months = how much to save each month

For the repayment of the debt, you need to know your minimum payment amount and the annual percentage rate (APR). The easiest way to figure out how much you’ll owe each month is to plug those numbers into an online debt repayment calculator.

For retirement, you need to think about how much money you will need to live on each year – most experts recommend at least 70-80% of your pre-retirement pay. Then divide that number by 4% (the standard investment withdrawal rate) to get the target balance needed at retirement. Then use an online calculator, which takes into account the return on investment, to calculate how much you should be saving each month. (For a more accurate projection of retirement savings, consult a financial planner).

4. Once you have the monthly or paycheck savings amount for each financial goal, go back to your budget and see where you can free up some money to save. Chances are you will need to go back and adjust the target balance or target deadline for some of your goals.

When you work backwards – by first identifying your goals, then looking back at your financial situation – you can allocate your money and determine what else it will take to reach those future milestones, whether they are ‘increase your income or reduce your expenses.

Having clear goals in mind and seeing what it takes to achieve them can make some of today’s sacrifices more acceptable.

As a reminder, here’s what you’ll accomplish in this month’s Bootcamp (we’ll link to each exercise as it goes live):

For each exercise you will get a detailed explanation of how to complete it and why it is important. Use hashtags #MasterYourMoney and #MasterYourMoneyBootcamp to share your thoughts, progress and connect with others through our Twitter, Facebook, LinkedIn and Instagram as you progress through each exercise, then join us for the live events.

Eleanor C. William