Money management is the process of knowing where you are spending your money today and having a well-thought-out plan in place for where you want it to go in the future. This program will cover the core concepts of money management and teach you how to:

• Set Goals
• Get Organized
• Track Spending
• Build a Budget
• Save Money

Chapter 1: Set Goals

Taking the time to set goals today allows you to achieve what you want in the future.

Set specific goals
Financial goals should be specific. For example, wanting to save $1,000,000 for retirement by age 60 is a goal, but wanting to be rich is just a wish. Before you start to save, determine exactly what you want, when you want it, and how much it will cost.

There are three basic goal types: short-term (achievable in under a year), mid-term (achievable in one to five years), and long-term (achievable in five-plus years). If you have multiple goals, you may choose to work toward them all at once or concentrate on one and then move to the next.

You can use the Financial Goals Chart to list your goals:

For short and mid-term goals, the calculation for how much you need to set aside each month is simple: the cost minus the amount you have saved so far divided by the number of months you have to save.

Example: The laptop computer you want is $800, and you would like it in six months. You have not saved anything yet. To reach this goal, you will need to set aside $133 per month ($800/6 = $133).

Long-term goals are a little more complicated because you can deposit your savings into an investment vehicle and earn interest, which will help you achieve your final savings goal. (You can do this for short and mid-term goals too, but the interest earned is usually minimal.) However, whatever you are saving for will also likely cost more in the future because of inflation (the gradual rise in the cost of goods and services over time). You can use the financial calculator below to figure out how much you should set aside each month for long-term goals. (Use your best guess as to how much you will need to save and what your return will be.)

Example: Your goal is to save $10,000 in ten years for your child’s higher education. If the annual rate of return (interest) averages five percent, you will need to set aside $64.40 each month.

Be flexible
Creating a budget (discussed in Chapter 4) will help you determine how much you can afford to save each month for your goals. If you simply can't manage to put away the amount you thought you could, don’t give up. Consider if you can extend the goal achievement date or set a similar goal that is cheaper. Perhaps a $5,000 Caribbean cruise is not doable, but you can save $2,000 for a vacation in Florida.