Turning a goal into a monthly number

A goal without a monthly figure attached is a wish. Working backwards from the amount and the date gives you the one number you actually have to act on.

For anything inside about three years, keep the money in cash or short term instruments. Market returns are only reliable over long horizons, and a goal with a date does not have one.

Common questions

Should I invest money I need in two years?

No. Over a two year window the range of stock market outcomes is wide enough that you could easily arrive at your date with less than you put in. High yield savings or short duration treasuries are the right home for money with a deadline.

How big should an emergency fund be?

Three to six months of essential expenses is the usual range, weighted toward six if your income is variable or your household depends on a single earner. Essential expenses, not total spending, since a real emergency also cuts the discretionary half.

Should I save for a goal or pay off debt first?

Build a small buffer first, often around one month of expenses, so the next surprise does not go straight back onto a credit card. Then attack high interest debt, then return to the goal.

What return should I assume for a savings goal?

For cash, use the current high yield savings rate and expect it to fall when rates do. For anything longer than five years, a real return of about 5 percent for a stock heavy mix is a reasonable planning figure.

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