4 Ways You're Sabotaging Your Savings Goals

Are you inadvertently making it harder to hit your savings targets? Find out four ways you may be hurting your efforts to save. Image source: Getty Images.

Do you have savings goals? Most of us do -- after all, there are lots of important things to save for, including big purchases and retirement. Unfortunately, whatever may be on your financial to-do list, chances are good that some of your financial habits are undermining your efforts to save.

So how can you tell if you're inadvertently derailing your plans? Check for these four red flags that could indicate you're sabotaging your savings goals.

1. Your goals aren't very specific

Knowing you need to save for something isn't enough. Your goals need to be "SMART" goals. SMART stands for specific, measurable, actionable, relevant, and timely. This means you need to:

• Decide exactly how much to save for each goal. For example, instead of "save for a down payment," your goal could be "save $100,000 for a down payment."
• Set a timeline for achieving your goal. If you want to buy a house in five years and need a $100,000 down payment, your goal should be "save $100,000 within five years."
• Make an actionable plan for achieving your goal. If you're trying to save $100,000 in five years, your action plan may be to save $2,777 per month.

The more detailed and specific your goals are, the clearer your plan for achieving them can be -- and the more likely it is that you'll do what needs to be done. It's much easier to measure whether you're saving $1,667 monthly than to know if you're on track to "save for a down payment" of some unspecified amount by some undetermined time in the future.

2. You're not paying yourself first

Are you constantly finding that you don't have enough money to save because you've spent it all? If so, you need to reprioritize what you do with your money. If you try to save whatever cash is left over at the end of each month, it's almost a given that there will be nothing left, because our spending tends to expand to take up all our available income.

Instead of putting your goals last on your list, pay yourself first. Treat your savings as a must-pay bill and automate a transfer to your savings account on payday. If you have clear savings goals, you'll know exactly how much you need to transfer to savings.

To hit that $1,667-per-month goal to save for a down payment, for example, you'd need to transfer $833.50 automatically out of each paycheck, assuming you're paid twice a month. You may need to do some budgeting to make sure you have the cash to transfer to savings -- but just be sure to treat your savings like a must-pay bill when you make your budget.

3. You don't have a dedicated savings account for each goal

If you're leaving your savings in your regular checking account or just have one big savings account for all your financial goals, then you're making it harder to achieve those goals. It's more difficult to track your progress under these circumstances, and you're more likely to end up raiding the account for the wrong purposes.

Instead, open a savings account for each financial goal. These could include a house fund, a vacation account, a retirement account, or whatever type of account you need. Having dedicated accounts makes it easy to automate transfers of money to different goals and to monitor your progress. You're also less likely to use the money for anything else once it's been earmarked for a goal that's important to you.

4. Your savings aren't earning much interest

When you're saving for short-term goals, your money should be in a savings account. But you shouldn't just stick it in any old account. There are big differences in the interest you can earn through a high-yield savings account versus whatever account you happen to have open at your bank.

Be sure to shop around and compare interest rates to find the best place to keep your cash. Savings for long-term goals such as retirement should be invested with a broker so you can put them into the stock market for greater returns.

Stop sabotaging yourself and get better at saving

Now you know some of the key mistakes to avoid if you want to succeed at saving money. Making a few simple tweaks, including automating transfers to savings and picking the right savings account, can help you turn things around. Take action today to set your specific savings goals, open the right accounts, and automate your savings so you can achieve those goals more quickly than you ever thought possible.