Six smart financial strategies
It’s always good to think about your goals and build a plan to reach them. Take stock of your personal finances and money strategies so you can ensure that your short- and long-term financial objectives are on track.
Below are six simple, attainable goals that you can put into action any time of the year.
Build an emergency savings account
Whether it’s a car repair, hot water heater leak, or medical expenses, the best time to prepare for the unexpected costs life inevitably throws our way is right now. Most financial experts recommend establishing an emergency fund comprised of roughly three to six months’ worth of expenses. This safety net of cash should be stored in a low risk vehicle such as a savings or money market account so you don’t have to dip into your retirement savings.
Make a plan to pay off debt
Paying off debt is one of the most effective strategies a saver can use to take control of his or her financial future. Every cent you pay toward a bill or debt is a penny—plus interest!—that could go in service of your personal financial goals, from boosting an emergency savings account to saving for a large purchase such as a car or home.
Sign up for your employer’s retirement savings plan
Retirement may seem a long way off. But ask anyone who is nearing or has crossed that finish line and they’ll tell you those golden years are likely a whole lot closer than it may often appear.
To retire as comfortably as possible, it is essential to begin saving early. Why? First, establishing a retirement savings habit now makes it more likely you’ll stick to it throughout your prime income-earning years when life’s expenses are often the most burdensome. Second, over time the interest earned on an investment will itself earn interest—a mathematical wonder known as compound interest—ultimately snowballing into much larger savings for those who get started earlier in their careers.
Boost your retirement savings contribution
Already enrolled in your company’s 403(b) or other defined contribution plan? Make it a goal to increase the amount you’re contributing: Many experts suggest saving at least 10 to 15 percent of your income per year—including any available employer match—but if you can’t quite set aside that much, try boosting your plan contribution by one or two percentage points once a year. Often you can turn the newfound wiggle room in your budget after receiving a raise or paying off a bill to your future advantage by routing that cash directly into your savings vehicle.
Plan your retirement end game
Remember, everyone’s individual financial goals are unique. Why not take the time to figure out how you want to spend your retirement years, how much that will cost, and what you will need to do to adjust your savings plan to meet that ultimate goal? Plugging your numbers into a retirement calculator can help you plan your ultimate retirement savings strategy.
Update your beneficiaries
Don’t forget your beneficiary designations for your 403(b), life insurance policy, or other retirement accounts. Even after a marriage, divorce, birth, or other life-changing event, many people forget to update their account beneficiaries. These designations supersede will or trust designations, so even if your estate plan is up-to-date, an outdated beneficiary form can leave you at risk for leaving assets to an unintended heir.
Want one last great tip to get your financial house in order? Plan to track your progress throughout the year. After all, watching your accounts grow—and your debts decrease—is one of the most effective motivators to help stay the long-term financial course.