Question 1

Why is planning together cheaper than adding the two pages?

Accepted Answer

Because the nearer goal ends. On the day it is met you stop needing its instalment, and if you keep saving the same amount that money goes to the later goal and compounds for whatever years remain. Two separate calculations cannot allow for that, since neither has been told the other exists. The longer the gap between the goals, the more the release is worth.

Question 2

Does this mean I pay less every month?

Accepted Answer

No. It means the level amount that funds both is lower than the two separate figures added together. You keep paying that same amount after the nearer goal is met, which is precisely what makes the arithmetic work. If you stop or reduce it on that day, the later goal falls short.

Question 3

What if I cannot afford the amount it names?

Accepted Answer

The page says so, and shows what each goal reaches on the money you actually have. It does not move a date or trim a goal to make the total balance, because that would be deciding something on your behalf. Cutting a goal, delaying one, or saving more are all real answers, and which of them is right is not an arithmetic question.

Question 4

Why is the nearer goal funded first?

Accepted Answer

Because it falls due first and cannot be part-paid later. A bill in six years has to be met in six years or not at all, so when the money runs short it is the later goal that carries the shortfall. That is a description of how the dates work rather than a recommendation about which goal matters more.

Question 5

What return should I assume?

Accepted Answer

Whatever you can defend. It is an input here rather than a figure we chose, because it is your forecast and it moves the answer a lot: at 7% instead of 11% the same two goals cost considerably more each month. Both goals are assumed to earn the same return, which is a simplification worth knowing about if one of them is close enough that you would hold it in something safer.

Question 6

What about three goals, or retirement as well?

Accepted Answer

This page is deliberately two. Once there are more, the interesting question stops being the release and becomes which goal to favour when the money will not stretch, and the goal planner answers that by comparing several allocation rules side by side rather than picking one.

Two Goals, One Salary