Saving money sounds easy – keep cash aside for future purpose – but in reality, people often face competing savings preferences. We want it all: Travel, Home, Flush Savings Account. So how do we figure out which savings goals to put first, especially when we’re working toward multiple things at once?
“You’re trying to live still and have fun and not eat ramen noodles every day,” says Al-Nesha Jones, certified public accountant and founder of ASE Group, a full-service accounting, tax and advisory firm in West Orange. ” New Jersey. Savings are further complicated by the fact that we currently face economic uncertainty, high prices on everyday commodities and a turbulent stock market.
Figuring out your savings priorities isn’t easy, but these strategies can serve as a guide:
First set up your emergency fund
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Consider how you felt the last time you couldn’t cover an emergency, Jones says. “If it has given you great anxiety, keep that feeling in mind when prioritizing.” In other words, make your emergency fund First of all, because it is very important for financial security.
“Now more than ever, people are understanding the importance of a rainy day fund,” says Eric Maldonado, certified financial planner and owner of Aquila Wealth Advisors in San Luis Obispo, California. “Having cash is a good fundamental in case the price of goods starts getting high.”
Next, make retirement a priority
“Retirement is a long-term game and time is on your side, so even if you start with something very small, the more time you give yourself to work on it, the better,” Jones says. “If you keep postponing retirement, we’re in the blink of an eye and now we’re scrambling.”
Thinking about the worst-case scenario of not saving for various goals can help underscore the importance of financing retirement accounts, Noah Damsky, principal at Marina Wealth Advisors in Los Angeles, says you should save first for the categories with the most dire consequences—and retirement tops that list, because no one wants to be poor in old age. “Walking through those scenarios helps crystallize what’s important,” Damsky says.
Decide what you want in the near term
This next category of savings preferences is complicated, because you must Set your near term goals, They might include buying a house, traveling, moving to a new city, starting a family, or something else entirely.
Dale L. Shaffer II, CFP and founder of Life Moves Wealth Management in Scottsdale, Arizona, recently moved with her family from Michigan to that area, and her near-term goal is to save up to buy a home there. He says the pandemic prompted many people to make major lifestyle changes, and their near-term savings goals changed as a result.
“Sometimes we reset expectations and sometimes we achieve more than we think,” he says. It’s important to check on your savings progress at least several times a year so that you can recalculate when needed.
Jay Zigmont, CFP and founder of Childfree Wealth in Water Valley, Mississippi, works with clients who do not have children and are not planning to have children. He says many of them are focused on major life changes, such as starting a business, moving abroad, traveling or taking a break from work.
“You may not be able to do everything at once, but you can do most things over time,” Zigmont says.
To keep all of these goals straight, Maldonado suggests opening a separate savings account for each and giving it a nickname like “Greece, $5,000” or “Lake Cabin Rental, $1,500.”
online, high yield savings accounts They offer higher returns than traditional banks, and you can take automatic deductions from your checking account or paycheck. “It’s positive inertia that keeps money where you want it,” he says.
You can make changes later at any time. “Just get into the habit of saving, and then you can go back and add other goals,” Jones says.
enjoy life along the way
As important as it is to save for all those priorities, it is equally important to enjoy life today. Jones cautions that don’t wait until you have a fully funded retirement to put money toward the items that bring you joy. So she’s saving up to buy Tesla, which she hopes to buy by the end of the year.
Maldonado and his wife contribute a set portion of money to a family entertainment account. “We take it out every quarter. It’s a guilt-free expense for the family,” he says, and goes toward things like camping trips, museums or parties. By having their savings safely deposited into other accounts, It can make the whole family feel good about spending it.
This article was written by NerdWallet and originally published by The Associated Press. The content is for educational and informational purposes and does not constitute investment advice.