<\/figure><\/div>\n\n\n\nLately, it seems we\u2019re constantly bombarded with terrible news, from ongoing public health concerns to the war in Ukraine, and, of course, inflation. Fortunately, many of us saved record amounts of our income early in the pandemic, and that combined with historically low unemployment has helped us to weather this difficult economic period. But for how long? Today\u2019s economic situation certainly shines a light on the importance of savings.<\/p>\n\n\n\n
Putting money aside in savings hasn\u2019t typically been a habit many of us have cultivated. The vast majority of Americans have no savings \u2014 or at least haven\u2019t saved regularly. Now seems like the perfect time to turn our current savings trend into a long-lasting habit that helps us meet future financial challenges and savings goals, and develop peace of mind.<\/p>\n\n\n\n
How to Save<\/strong><\/p>\n\n\n\nWhen I was just starting out in my career, my money was tight. I remember thinking, \u201cThere\u2019s no way I can afford to put money aside in savings \u2014 I need every dollar I get!\u201d But for most of us, this simply isn\u2019t true. A good household budget will reveal where your money is going each month, and often you\u2019ll find that you\u2019re spending more than necessary on non-essential expenses. Even putting aside $50 a paycheck can add up to more than $1,200 a year. You can decide the maximum amount you can set aside each pay period or month and work with your employer and bank to have those funds automatically deposited or transferred into your savings account regularly. When you don\u2019t actually see that money showing up in your checking account, it will be out of sight and out of mind, which allows it to grow untouched. <\/p>\n\n\n\n
Create Your Emergency Fund<\/strong><\/p>\n\n\n\nThe upside of squirreling money away these days is that we\u2019re creating an emergency fund for ourselves in the case of job losses, unforeseen medical issues, or repairs on vehicles. Even the economy stabilizes, keeping an emergency fund intact is critical. Financial guru Dave Ramsey recommends that everyone have an emergency fund of at least $1,000, and this is advice we subscribe to here at Ludmila CPA. If you don\u2019t currently have this much set aside, you should make this a top priority. <\/p>\n\n\n\n
Put anything extra after you\u2019ve done your monthly budget into a separate savings account that you can access for true <\/em>emergencies. This is not for buying clothes, taking trips, or paying bills, which are expenses you should be anticipating and budgeting for. Rather, this emergency fund is for the expenses we don\u2019t see coming \u2014 like a new tire or car repair, a busted air conditioner, or a burst pipe in your plumbing \u2014 and it should sit outside the accounts you use to pay bills. It should be fairly liquid, so not an investment, but not so easy to use that you\u2019re tempted to. Once you have an emergency fund in place, you\u2019ll enjoy peace of mind from knowing that a true emergency won\u2019t wipe you out financially.<\/p>\n\n\n\nThen you can move to the next step: creating a safety net.<\/p>\n\n\n\n
Save 3 to 6 Months\u2019 Worth of Expenses<\/strong><\/p>\n\n\n\nIt\u2019s always a good idea to plan for the worst \u2014 a job loss, a catastrophic illness, etc. \u2014 by accumulating enough money to live on if you lose your income. With economic uncertainty expected to linger for months or even years, it\u2019s especially wise to start growing your financial safety net of three to six months\u2019 worth of household expenses. You\u2019ll find that having this amount set aside provides tremendous reassurance that you could survive a loss of income. <\/p>\n\n\n\n
Once you have this in place, put as much savings as you can into your retirement account(s).<\/p>\n\n\n\n
Where to Keep Your Savings<\/strong><\/p>\n\n\n\nDepending on your purpose and goals, you have several types of savings accounts to choose from:<\/p>\n\n\n\n
Basic Savings Account: <\/strong>This is an easy option \u2014 ideal for having direct deposits automatically placed into it and liquid enough to access in case of emergency. However, interest rates on savings accounts are so low \u2014 lower than inflation \u2014 that it\u2019s not a great way to grow your money.<\/li>Money Market:<\/strong> A money market offers more interest \u2014 though only slightly more \u2014 enabling your money to grow a bit faster. And it\u2019s just a touch less convenient to access, which can be a good thing, as it won\u2019t tempt you to dip into it for non-emergencies.<\/li>Certificates of Deposit:<\/strong> A CD is a good, conservative savings option that forces you to hold off on using your savings. With this time deposit, you wait for the CD to mature and accrue interest, based on a specified fixed interest rate. These offer slightly higher interest rates than savings accounts, but rates are so low right now that it might be best to select a CD with a shorter term that will mature more quickly. When interest rates are higher, go for a longer period to see that savings maximized. <\/li>Investments: <\/strong>To grow money, experts recommend a portfolio of diverse assets \u2014 real estate, businesses, mutual funds, and other financial instruments offered by brokerage firms. Many tax-favorable accounts deserve attention, namely the traditional and Roth IRA, which you should contribute to regularly. Consult a professional to discuss which one is best for your situation.<\/li>Health Savings Accounts:<\/strong> An HSA is for families or singles who have high-deductible health plans to accrue savings for medical expenses. The nice thing about this plan is that it enables you to pay for medical expenses with pre-tax money.<\/li>Education Savings Plans:<\/strong> Plans such as the 529 are designed to help families afford the rising costs of college. Speak to a financial professional to set this up or determine how best to save for your child\u2019s college education.<\/li><\/ul>\n\n\n\nNow\u2019s the time to start making savings a habit, for your long-term financial health. We\u2019d love to help guide you toward the right savings solution \u2014 contact us today<\/a>. <\/p>\n\n\n\nAnd enjoy your summer!<\/p>\n","protected":false},"excerpt":{"rendered":"
Tips for saving more money and watching it grow. Lately, it seems we\u2019re constantly bombarded with terrible news, from ongoing public health concerns to the war in Ukraine, and, of course, inflation. Fortunately, many of us saved record amounts of […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[12],"_links":{"self":[{"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/posts\/317"}],"collection":[{"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/comments?post=317"}],"version-history":[{"count":3,"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/posts\/317\/revisions"}],"predecessor-version":[{"id":399,"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/posts\/317\/revisions\/399"}],"wp:attachment":[{"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/media?parent=317"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/categories?post=317"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ludmilacpa.com\/wp-json\/wp\/v2\/tags?post=317"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}