Save for Emergency Fund
It is important to put money a side for unexpected situations. According to a Bankrate survey, almost two-thirds of American adults said they couldn’t cover 6 months’ worth of expenses with their savings. In fact, 40 percent of Americans don’t even have an extra $400 available for emergencies, according to CNN Money.
This could be an unexpected car repair, your emergency appendectomy or a sudden job loss. If the economy starts to slow down and your job is at risk, you’ll be thankful if you’ve socked away a good amount of money into your emergency fund to tide you over until you find a new job.
Ideally, your emergency fund should be about three to six months of your expenses. The Bureau of Labor and Statistics estimates average household monthly spending at about $4,776, which means an emergency fund for six months should hold about $28,650.
If you are just starting out, try to put aside at least $1,000.00 to start. If you are working to get out of debt, save what you can to bring your emergency fund up to between six to 12 months’ worth of your income. If you are single or living on just one income, you may want to go with a larger emergency fund.
Another reason to increase your emergency fund is the continuing rise in medical costs. Even if you have insurance or any kind of insurance you might find yourself with a health condition or medication requirements that isn’t fully covered by insurance. In addition to your emergency fund, make sure you have a plan and good insurance in place to help you financially survive unexpected events in your life.
Start Small, Think big
Start Small. Think Big,’ with a short- term goal. The truth is, people save more successfully when they set a short-term goal. For instance, committing to saving $20 a week or a month for 6 months is much more attainable that setting a goal to save $500 a month for a year. Once you reach the short-term goal, you’ll have created a habit of saving you can be proud of! You’ll be able to keep going strong with a new goal.
Save for Retirement
Another important reason to save money is your retirement. The sooner you start saving for retirement, the less you will have to save in the future. You can put your money to work for you, especially if you take advantage of the magic of compounding interest.
For example, if you opened an account with $1, deposited $100 every month for 10 years, and earned a 6.5 percent interest rate or return, you’d have $16,842. Keep it up for another 10 years (20 total) and you’ll more than double your money to $49,045. After 30 years of just $100 each month saved, you’d have $110,624 (including compounded interest) from your $36,000 investment. According to Hanz Finanicial.
As you continue to contribute over time you will be earning more interest on the money you have, than you put in each month.
You should at least be contributing up to your employer’s match and eventually, you should contribute 10 to 15 percent of your gross income. You can contribute to your 401(k) as well as an IRA.
College Education
Begin saving money for your future education. Each year more people return to school to earn their masters or doctorate degrees. And that comes with a hefty price tag. As of 2017, public colleges had an average cost of about $9,410 for in-state tuition and $$23,893 for out-of-state tuition. Private colleges cost $32,405 on average, and the cost of both public and private education continues to rise by about 6 percent each year.
You may also consider saving for your child’s education when the time comes. If you are saving for your child’s education, you should look into using a 529 plan.
There are different options and incentives available based on the state that you are living in. If you are interested in going back to school for yourself, think about saving for more than just tuition. If you will go back full time, you may also want to save up to cover your living expenses.