Whether you live to work or just want a paycheck to fund your lifestyle, there's one simple question you should ask yourself when you're ready to start saving money.
"What's going to get you out of bed every morning?" asks Shannon McLay, former Merrill Lynch financial advisor and founder of The Financial Gym.
The more specific your goals are, the more likely you are to accomplish them, she says. You might hear general advice that says to pay off debt, save a three-to-six-month emergency fund or max out your retirement accounts, but you'll probably veer off course unless you have a strong vision of what you want.
"Pay down student loans and save for retirement is our parents' advice, but it's not going to resonate when you are depressed and want to buy something on Amazon," McLay argues.
It might take a little soul searching, but finding the goals that motivate you is the first step to growing your savings over time. You need to have a dream in mind that inspires you so you're not tempted by the instant gratification you get from making a spur-of-the-moment splurge.
McLay and her team helps individuals and families identify the "whys" that motivate them. She shared three steps to help you identify your savings goals and personalize your financial plan.
Step 1: Notice what inspires you
The hardest part about saving money is doing it regularly. Unless, you're saving up for something exciting.
Before you commit to any hard and fast rules, take a few weeks or months to notice what makes you happy. Don't worry if it's vastly different than what inspires your friends or colleagues. There's no rule book, McLay says. Take pleasure in the freedom to choose.
Some couples might want to put aside funds for a wedding, while other people may dream of buying a home. McLay says many of her clients are saving up for a pet.
Another common savings goal is an ample travel fund. Do you want to go somewhere overseas or within the U.S.? How long do you want to travel and will you need to take unpaid time off work to do so?
Don't be afraid to think outside the box when listing out your dreams. Everything has a cost, says McLay, and too often people overlook goals that they might not consider to be conventional reasons to have a savings account.
"Some tattoos can cost as much as $2,500," says McLay. And if you want to wait and have children later in life, egg freezing starts at around $10,000.
As you dream up ways you'd like to spend money throughout your life, remember that there's "a lot of life to live" before you reach retirement, says McLay. It's best to over-prepare during this stage by thinking of all the possible reasons you might need a reserve of cash.
Step 2: Associate your goals with an outcome and a cost
After you've taken some time to think about what inspires you, identify what tangible outcomes are linked to each of your motivations.
If you are inspired by the idea of living by the ocean, research how much seaside property costs in the area you want to live. If you want to go back to school, look up the price of tuition and create a budget for your living expenses.
Don't be afraid to look at the numbers during this stage; while your goals may seem more expensive than you realized, it's best to have a ballpark of how much you'll need so you can set a plan in motion.
Step 3: Set specific dates
The last step before starting to save is identifying a timeline.
Not only are timelines motivating, but they also help you choose the right kind of savings and investment accounts to use based on how soon you'll need the money. You might realize during this stage that you're putting your money in all the wrong places, and that's OK. In fact, it's actually quite common, says McLay.
"People will just automatically contribute [the maximum] to retirement accounts, but they might not have enough cash to buy a house," she explains. In this case, it would probably be better to have cash on hand for a down payment, knowing you can increase your retirement contributions once you buy a home.
As a general rule of thumb, put cash you'll need within the next two years into a a high-yield savings account such as the Marcus by Goldman Sachs High Yield Online Savings or the Vio Bank High Yield Online Savings Account. Make saving easier by having a portion of your paycheck automatically deposited into a separate account than the one you use to pay your bills.
For longer-term goals, consider investing your money with either a robo-advisor or a brokerage account.
"You need to invest your money in the way you need your money. Medium-term money, if it grows, will eventually become long-term money," says McLay.
Learn more: Here's how to choose the right asset allocation for your short- and long-term savings goals
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