6 Savvy Things You Should Be Saving For Now
So it’s probably not news to you that you should be saving a bit of each paycheck you earn for that future “rainy day” so many talk about. But what are you actually supposed to be saving for? When you don't have actual goals in mind, it is easy to get lax in the saving department, and dip into your funds a bit more than you really need to.
Here are six things to be saving for right now:
• Emergency Fund: Let’s start with one you’ve definitely heard about, especially over the past few years as the economy shifts up and down. An emergency fund is generally three to six months’ worth of general living expenses to be used in the event you lose your job or cannot go to work due to illness or disability. When determining the amount of this fund, ask yourself a number of questions, like: Do you have a second household income, do you work in an industry where there are currently a good number of open positions or where hiring is on the uptick, and would you have the ability to make a part-time salary or consulting income while you looked for a position?
• Retirement: This one’s a no-brainer and you’ve probably been hearing about it since the day you entered the work force. The sooner you start saving, the less you’ll have to put away per paycheck in order to meet your future needs. There are retirement calculators available all over the internet to help you determine how much you will ultimately need to retire at your desired age with the desired lifestyle, so get calculating! It’s generally most beneficial to utilize your company’s 401K program (especially if your employer matches), but there are also other ways to save for retirement. Contact a retirement planning advisor to get ideas.
• Your Child’s Education: We’ve become conditioned to start thinking about this one from the moment conception is confirmed. And why not? College is ridiculously expensive these days, even for state schools. But after a savings cushion and putting away something for retirement, things may be starting to get a bit tight. It’s still worth it to put away for this one even if you can only afford $25 or $50 per month. There are 529 plans available in most states that provide favorable tax treatment, but you can also do a custodial savings account or even a mutual fund for your child if you want the use of the money to be less restricted. Every little bit you can put aside will help! Be sure to check with a professional to understand the tax consequences of each type of saving.
• Capital Improvements & Major Repairs: If you’re a homeowner, it’s easier to save for that landscaping overhaul over time than it is to pull the trigger on the entire expense all at once. The same can be said for that transmission blow up you seriously did not expect. Bottom line: having a little cushion put away for major improvements and repairs will spare major headaches.
• Christmas/Holiday Spending: Save for Christmas or Holiday spending throughout the year so you’re not dying from credit card hangover after the celebrations are over. The bonus to this approach is that you can actually start doing your holiday shopping before Tom the Turkey hits the table . . . you have the money set aside!
Your Next Vacation: Why not vacation the savvy way and pay cash for it? So many people pay for their vacations on credit and then trudge back to work to pay off all the fun they just had. But there’s something supremely relaxing about kicking back for a few days, all the while knowing that it’s completely paid for already.