You work hard for your money. And once it lands in your bank account, there are so many things you want to do with it.
Although you have to pay your most important bills first, it’s also important to savcoe money for your future. In other words, pay yourself first.
So before you blow all your money on expensive must-have items, think about stashing some of it beforehand.
Here are five important savings goals to keep in mind:
1. Emergency fund
Savings Goal: 6-9 months of living expenses
You never know when the unexpected will set you back financially. An emergency fund can be a good way to prepare ahead of time so you don’t have to use debt when you need a car repair, you lose a job, or some other costly situation arises.
It’s a good idea to aim for saving between six and nine months’ worth of living expenses. You don’t have to save all of that at once, however. Start with a small amount each week, and gradually save more as your circumstances allow.
While keeping your emergency fund in a savings account that allows for easy access is a good place to start, you don’t have to keep your money in this “traditional” type of account. Consider keeping four to six weeks’ worth of living expenses in a regular, liquid savings account and putting the rest in an account with a higher yield. For some savers, according to a paper published in the Journal of Financial Planning in 2013, it makes sense to keep a portion of a long-term emergency fund in a taxable investment account.
Determine your own risk tolerance, and decide where it makes sense to keep your emergency fund, based on your ability to sleep at night and how quickly you think you need to access the money.
2. Retirement savings
Savings Goal: 15 percent of income
Do you save money regularly for retirement? If not, it’s time to make that a bigger priority.
The Center for Retirement Research at Boston College says that you should save about 15 percent of your income to retire comfortably.
Like many millennials, you are probably taking advantage of your employer’s 401(k) plan. However, you’re probably not putting in much more than the bare minimum.
Thanks to compound interest, the dollars you put away today become much more valuable when you reach retirement.
If you earn $50,000 per year and save three percent of your pay with a three percent employer match, you are saving $250 per month. Or, $3,000 per year.
And if you do the same over 30 years with an average seven percent return on investment, you will have just over $300,000 saved.
But how far does $300,000 go for retirement, especially after inflation takes its toll?
If you want to maintain the same standard of living in retirement, that is the equivalent of six years of income in today’s dollars. And with life expectancies increasing, you’ll most likely need a lot more than six years of living expenses when you hit retirement age.
3. Home down payment
Savings goal: $50,000 (or 20 percent of your future home’s price)
Home prices have outpaced wage growth for a while, according to RealtyTrac. That’s making it harder than ever for young people to buy their first home.
While some lenders will give you a loan with less than 20 percent down, it’s the target you should save for to ensure you can really afford the home. Plus, you’ll avoid costly private mortgage insurance.
The median home price in the United States as of June 2016 is just under $250,000, according to YCharts. And 20 percent of that is $50,000. That would leave you with a mortgage payment of around $1,000 per month (not including taxes and insurance).
Keep in mind, home prices vary dramatically between cities and states. Take a look at homes in your market so you can learn what you want in a home and how much it costs.
Then, set 20 percent of that as your target when you save money for a home.
4. New car fund
Savings Goal: $26,000 every 11 years
If you are already paying off student loans, do you really want to carry more debt for a car? Not if you can avoid it by planning ahead!
According to Kelley Blue Book, most new cars cost between $20,000 for a compact sedan to $55,000 for a midsize luxury car.
Let’s assume you are responsible with your spending and want a moderately priced, quality vehicle. We’ll use $26,000, the average price of a new, small SUV, as a target savings goal.
As of last year, the average car in the United States is about 11.5 years old according to a 2015 report from IHS Automotive. If you want a new car, as opposed to a less expensive used car, you should save about $200 per month in a car fund to buy a new one every 11 years.
Or, if you want to save money in the long-run, consider living without a car entirely.
5. International travel
Savings Goal: $3,000 per year
Even while paying off debt, sometimes you just want to get out there and travel.
Through travel hacking and serious budgeting, an international trip can cost a few thousand dollars. Between airfare, accommodations, meals, and entertainment, it adds up fast!
If you have the vacation time and money to take a big trip each year, it is easier to save money a little bit each month. That way, you can pay for the trip out-of-pocket with cash rather than risk credit card debt.
You should put away $250 per month if you want to budget $3,000 per year for an annual international trip.
Prioritize creating a plan to save money
Saving money doesn’t happen by itself. And it may not come naturally to some people.
You have to work to save money with a focused effort. However, saving shouldn’t be your only financial goal. It’s just one piece of the puzzle.
Now that you know some common savings goals, you can get to work making it happen.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|