When developing a budget or financial goals it can be tricky to figure out how far in advance you should plan. If you're too short-sighted you could wind up with savings that don't meet your needs. Conversely if you think too far out, you could be putting some of that money you're tucking away for your savings to better use.



Here's how to figure it all out:

What are your financial goals? List your financial goals on a piece of paper. They might be goals like:

* To save for my child's college education

* To save for retirement

* To save money for emergencies

* To buy a new car or house

Once your financial goals have been listed, here are a few calculations you can make to know how much to save.

Emergency fund: Experts advice people to set aside at least three to six months of cash or liquid assets (investments you can easily convert to cash) in the event of a loss of job, medical emergency, short-term disability, etc. Figure out how much you have to set aside for this emergency fund after your current expenses, and create a goal. If you make $3000/month then you'll want to set aside a minimum of $9000. This doesn't mean you have to save it all tomorrow - begin saving for it and create a plan. Maybe you'll be able to save that much in a year, maybe it'll take two.

Debt: Most experts agree that your total monthly debt payments shouldn't exceed 36% of your gross monthly income. This debt includes your mortgage, car payments and credit card debt. Add up your debt and calculate your monthly gross income to see where you are. If you're above this ration, create a plan to get your debt down quickly.

Savings: You've probably heard the rule that you need to save 10% of your income. This rule is a good rule to follow, assuming you are placing additional money into a retirement account. Use this 10% rule with your other savings goals including your emergency account, college education or other goals.

Retirement: Experts tell us that our retirement income should be 75-80% of pre retirement income. This means if you're making $50,000 right now, your retirement income will need to be $37,500.

Using these numbers will help you determine exactly how much you need to save, how much you have to work with, and how long it will take you to save the money. A little basic planning and goal setting will make the process understandable and manageable. The numbers presented here, and the guidelines, are just that - guidelines. Your budget and financial plan needs to meet your needs and the needs of your family. This is why it is important to set financial goals and to save with a purpose.