How to Prioritize Saving Goals
More people are taking savings seriously after seeing the large financial impact of the coronavirus pandemic. It is great to focus on savings, but to maximize this strategy, you should also save with a specific purpose in mind. This will help you to grow your money faster. Here are some tips to prioritize your savings before you put that money away.
1. Save for the next emergency.
A lot of people suffered because they lacked an emergency fund going into the pandemic. It is always smart to have one at the ready, and this should be your first priority right now. Save up for an emergency fund that is three to six months worth of your expenses. Place this money in a market account or a certificate of deposit to earn interest and still have the money accessible for you in case of an emergency, such as loss of employment or a health crisis.
2. Put money on your retirement fund.
After preparing for emergencies, you should focus on your future next. The amount you need to save for your retirement will vary depending on the life you want to live at this time. In general, it is good to tuck away 15% of your income and build this amount up as your income increases.
3. Save for other financial goals.
Do you want to buy a car or save enough for your first house down payment? You can save up for these big purchases, too. There is less interest to worry about and your budget will always have room for you to do whatever you want. Which financial goal to work on first depends on your personal situation. If you are marrying soon, you may want to save up for your honeymoon or wedding expenses, then put money on your first house.
If you still have extra money lying around, it is good to invest in the stock market to build wealth. This is for the long term. You can put your money in mutual funds to spread the risk over several different stocks. Many mutual funds are available. The best rule to start is to look for a fund that has a stable and good growth history. You can also think about the purpose of this money. Maybe it will add to your retirement fund or you can use it for a big vacation later on. Once you determine your priorities, you an track your progress and make sure you are moving closer towards reaching your goals every month.