SAVINGS BASED ON PRIORITY
Saving money is always better earning. Many people earn high income but they failed in saving wisely. You’ve covered the necessities like rent, the light bill, and groceries, and now you’ve got some money left over. You know you’re supposed to be saving, but where do you even start?
PRINCIPALS OF SAVINGS
Understanding a few saving principles can help you prioritize your savings goals and figure out where to put your money. The first principle is to focus on retirement. For most people, retirement is likely to be the biggest financial goal of their lives, so you may want saving and investing to be a major focus.
But if there are financial burdens that could jeopardize your retirement savings, removing them is an important priority. That’s why an emergency fund is the place to start.
CUSTOMIZE YOUR EXPENDITURE
Expense like an emergency room visit or car repair, let alone something more severe like losing your job. To protect your long-term savings, you can make setting aside three to six months of expenses a top priority.
It may be helpful to keep your emergency fund in a separate savings account that you can access quickly but won’t be tempted to borrow from for day-to-day expenses. retirement account when you find yourself in a jam.
RETIREMENT AND EMERGENCY FUND
Once you’ve got an emergency fund, consider shifting your focus to another common retirement savings obstacle high-interest debt. High-interest debt is anything over 5%, so credit cards, personal loans, and especially payday Loans.
Debt that doesn’t reach that 5% threshold, things like most federal student loans or mortgages, can be approached a little differently. It’s important to make regular payments on these, but don’t worry about trying to pay them off early.
You’ll likely earn more over the long run by investing than paying off low-interest debt as of 2020. Once you’ve got debt under control, you’re ready to focus even more on retirement.
A commonly held rule is to save at least 15% of your income for retirement. So where should you put all that money? Consider using tax-advantaged investment accounts and minimizing fees to potentially maximize your savings growth.
CHILDREN SAVING PLAN
But you may want to consider contributing anything beyond that to an IRA, which might have lower fees and more investment choices. After maxing out retirement savings, the next step pretty much depends on your circumstances. But the same principle applies using tax-advantaged accounts can help to potentially maximize your savings.
For example, if you’re saving for a kid’s college, consider contributing to a children saving plan. It might seem strange that a child’s education is a lower priority than something as far off as retirement, but remember, borrowing for college might be easier than borrowing to fund your golden years.
Health care is another major expense that may require saving. If you’re on a high-deductible health plan,
a health savings account is another tax-advantaged account you might want to consider. HSA’s are designed to let you set aside and invest un-taxed cash to pay out-of-pocket for medical expenses.
The combination of tax benefits and potential growth from investments may make an HSA an attractive vehicle for saving for medical expenses in retirement. If you’re lucky enough to have maxed out all the tax-advantaged accounts that are available to you, you could also consider investing for long-term goals in a regular, taxable brokerage account.
A final principle to remember is that investing may not be prudent for short-term goals, like You may not have time to recover from market downswings, so you might also want to consider using a high-interest bearing savings account rather than investing money you’ll need in the next few years.If you’ve made it to this point, congratulations you’re a savings pro.
To live happy life with your family, you need a better savings in all times. and also the most important principles to remember are to focus on retirement, use tax-advantaged investment accounts, and invest for long-term rather than short-term goals.Whatever comes next, make sure you’re keeping the basics well-funded.