Reaching inside your heart and figuring out your dreams is a fairly easy task, because you only need your own heart and imagination, and some way to write it all down. And we already know that understanding your dreams is the key to a good relationship with money. But once you’ve got a lock on your ideal future, how do you figure out what it will cost?
Some goals make it easier for you – they come with a set cost. For example, the average American wedding costs $28,000. Many of us dream of having a beautiful wedding somewhere down the line, so that number gives us somewhere to start with.
Goals With Definite Numbers
Some goals are bigger than a dream wedding, and some are smaller. Last summer, one of my savings goals was simply to put enough money aside for the year’s textbooks. Based on the cost of my previous textbooks, I estimated I would need about $500 for six months of textbooks. In the end, I spent about $440 on textbooks, so I actually had money left over in my textbook fund.
It may take some research to find out what your goals will cost you. “Down payment for a house” is a common savings goal, but how much is that, exactly? Depends on the type of house (or condo) you want to buy, and the area it’s located in. You’ll have to do some searching on real estate websites. That can be fun, though: looking at pretty houses you might someday buy! (20% of the purchase price is a good rule-of-thumb for a down payment on property, by the way.)
It’s ok to guess a little, or even a lot. Like with my textbooks – I overshot that amount I actually needed by $60. But the great thing about that is, I just rolled that extra $60 into my next savings goal once all of my textbooks were purchased. It’s better to overestimate than underestimate when it comes to how much you should save.
Goals Without Definite Numbers
Not every dream comes with a price tag attached. Wanting to become a stay-at-home parent, or a world-class photographer, or draw comics are all goals that cost an indefinite amount of money. If nothing else, you have to be able to pay rent and buy food while striving for your goal. So what, if anything, should you be saving for these things?
When it comes to the money you’ll need to live on, you’re back to doing a little research. What’s the cost of living in the locations you want to live in? Or are you planning to travel and be constantly in motion?
One of the best things you can do is to find someone who has done what you want to do, or something similar. A mentor is always a handy thing to have, but it’s especially nice to be able to ask about the realities of paying for certain lifestyles.
A word of warning: Money is a taboo topic. You don’t want to find someone you admire and immediately start drilling them on their rent and grocery costs, and how they pay for it. You want to find someone you can trust, and then earn their trust in return before you ask any personal questions. But if you can find the answers you’re looking for, the information will be invaluable.
Or, again, you can just guess. An educated guess on what your ideal lifestyle will cost is miles better than having no idea whatsoever.
{ 1 comment… read it below or add one }
I agree with this post completely….I used to have so many vague goals and realized my main limiting factor was money. So I wrote down all my goals and every tiny step and the associated costs. I also made one column for “hours of work required”. ex. if something costs $160, it would take 2 days of work for me to pay for it. Having such a list cut down on useless spending for me and also made me more motivated at work.