How to Manage Your Savings Goals Presented by Dena Petersen Coming up with a list of savings goals is easy: retirement savings, a new car, a down payment for a new home, or a child’s college education could be a few on your list. A little prioritization of your goals today can make a big difference in the future. Schwab recommends investors think about tackling multiple savings priorities at once. To make multiple savings goals feel more attainable, turn them into a series of manageable steps: Step 1: Contribute to your company’s retirement plan up to the full match. If your employer offers a workplace-sponsored savings plan like a 401(k), contribute
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at least enough to receive the maximum employer match. Whether your employer matches 50 percent of your contribution or dollar-fordollar up to a certain amount, it’s hard to beat that kind of return, even in a bull market. Step 2: Pay off your non-deductible bad debt. Eliminating your debt, especially the high-interest consumer debt with no tax benefits, makes it easier to reach your savings goal. If you’re carrying a balance on your credit cards or other high-interest loans, create a spending budget and look for ways cut back on nonessential expenses. Use that extra cash to pay down those expensive debts, until you’re down to zero. And always try
negotiating with your credit card company or loan provider for a lower interest rate. A handy tip to help manage debt is the 28/36 debt rule: no more than 28 percent of your pre-tax household income should go toward servicing home debt, such as your mortgage payment, home insurance, and property taxes. And no more than 36 percent of your income should go toward all debt, including credit cards and car loans. Step 3: Be prepared for emergencies. Unexpected situations happen. They’re never easy, but you can cushion the blow by being financially prepared. Tuck away between three to six months of essential living expenses in a savings or money market
account. Your money won’t grow much in these types of vehicles, but it will be easily accessible when you need to pay bills in case of a job loss or unexpected illness. Having some cash ready for unexpected situations will help you avoid expensive and unwise alternatives like living off credit cards, being forced to sell investments at an inopportune time, or withdrawing money from a retirement savings account, which often results in having to pay early withdrawal penalties. Step 4: Max out your retirement accounts: Investing can help you meet your financial goals, but the amount you save and spend can count more. Try to contribute up to the IRS maximum if you
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