When you’re trying to make the most out of your money, you’re bound to run into countless people that tell you it’s important to “save” as much as you can. Unfortunately, there are so many different things that we all want to save for; it can be difficult to figure out what you should be prioritizing first.
Do you stock up on your emergency savings, so you’re protected if anything happens to your home or your job? Or do you focus on getting your immediate short-term goals on track instead? Today, we’re going to look at the savings goals you should focus on first when you’re trying to become financially independent.
1. Deal with Debts First
Loans can be a very helpful way to manage your expenses and buy the things that you need in life. Whether it’s a short term loan such as those offered by Omacl to help you pay for repairs to a broken roof, or a car loan to help you travel to work, there are tons of great options out there. However, paying back loans also means that you have less cash to spend on your savings.
With that in mind, it’s best to focus on paying off your loans as quickly as you can, before you begin concentrating on savings. At the very least, try to get rid of any high interest loans before you begin working on your building your reserves.
2. Focus on Emergencies
Once you’ve got your debts out of the way, you can start to think about your emergency savings fund. Emergency funds are there to keep you going when unexpected expenses come your way. Most experts recommend saving about three to six months’ worth of your expenses. This will ensure that you’re protected no matter what comes your way.
Your emergency fund will be there to help you through serious financial issues, such as losing your job, or dealing with a medical expense that you hadn’t planned for. For things like expected home and car repairs, you’ll need a totally different category in your budget dedicated to irregular costs.
3. Prepare for Your Retirement
Once you have a decent emergency fund in place – enough to make you feel safe and comfortable – you can work on saving towards your retirement. A financial advisor will help you to decide how much money you need to start putting away. However, if you don’t want to talk to an expert, you can take a look at the deals that your employer offers, and plan to save as much as possible.
In an ideal world, you would probably save around 15% of your income towards retirement. If that’s too much for you to handle right now, then you can start at 10% and begin working your way up when you have a little more money to work with.
4. Save for Your Other Goals
With your emergency fund and retirement savings in place, you can begin saving towards your other shorter-term goals. This could include money for a car, a down-payment on a new home, or even a vacation with your loved ones. Saving up for these purchases will help you to save money on interest by not having to take out an additional loan.
You may have multiple short-term saving goals to think about. The ones that you choose to focus on first will depend on your personal situation, and where you are in your life. For instance, if you want to buy a new car in the next year, but a new house in the next five years, you will obviously focus on your car costs first. It all depends on you.
5. Think About Investing
Finally, when you have all of your other savings strategies ironed out, you can begin to think about what you might want to do with any additional money you have. If you want to build your wealth and open up new opportunities in the future, then you can put some extra cash aside each month and begin to invest it into the stock market.
When investing in the stock market, it’s worth thinking as long-term as possible. Try looking into mutual funds and other options that will diversify your portfolio and reduce your risk levels. As your wealth begins to grow, or you become more comfortable in the investing environment, then you might decide to explore other aspects of the stock exchange. Remember, learning as much as you can about your chosen market is the key to achieving success in investing.