What are your goals?
Once you’ve done that, you can set some goals for the future, so you know what you’re saving for, and can work within the timelines that come with them. For example, if you want to take a nice vacation next year, you can decide how much money you’ll need, make a plan for how to save it, and pick the right account to help you grow your cash (more on that below) without leaving you vulnerable to potentially losing money.
Other common goals many people have are saving to buy a home or saving for retirement. (Remember, if you’re Childfree or permanently childless, you don’t have to worry about saving for your children’s education – but you may want to save for your own!) Buying a home is likely a more medium-term goal, and you might be a few years away from that (especially if you’re intending to buy in a more expensive part of the country and are planning to make a 20% down payment, as is recommended). Retirement is a long-term goal, and depending on your age, it could be 20, 30, or 40 years out. Based on these timelines, you’ll pick accounts to grow your money and keep it safe.
How do you choose (and use) the right accounts?
Don’t be intimidated by this process! The internet makes it very easy to learn about the best accounts and banks out there. You can start by googling “best high yield savings accounts,” or “best IRA accounts of [month, year],” and you’ll end up with side-by-side comparisons of what’s being offered the industry at large.
Your CERTIFIED FINANCIAL PLANNER™ will likely also be keeping abreast of changes in account offerings, and can do research on your behalf, too. When you’re ready to open your new financial accounts, it might be quite fast and easy in some cases; for example, you can open a new online savings account in just a few minutes. Other account types might require more time and legwork.
Once you’ve got the accounts open, automate your contributions to help you stay on track. You won’t have to remember to add money to your new savings account or IRA if you’ve got them set up to take money out of your checking account every month. Then you can watch your balance grow over time and the money will be available for the goals you set. You will have to find the balance between meeting your everyday financial needs and different goals for the future, and a CERTIFIED FINANCIAL PLANNER™ can help with this too. Financial planning is a living, breathing, dynamic experience, and you’ll likely end up being flexible over time with what financial goals you’re focusing on.
Should you pay off debt first?
While it may be overwhelming to think about saving for the future, once you’ve got your budget in place and a plan in mind, it’ll be easier to carve out the money for those goals. You’ll also need to find the right places to keep (and grow) your cash, and work out a balance between paying off debt, meeting your everyday financial obligations, and working towards the future.