Prioritizing Saving Type

What Are Savings?

Savings refers to the money that a person has left over after they subtract out their consumer spending from their disposable income over a given time period. Savings, therefore, represents a net surplus of funds for an individual or household after all expenses and obligations have been paid. Prioritizing Saving Type Save for Emergencies – Most of the time, your first priority should be saving up an emergency fund of three to six month's worth of expenses.  As soon as you have enough to put into a money market account or a certificate of deposit, do so, as it will earn more interest that way. Since this money is your emergency fund, it should be easy to access if you need it. Your emergency fund should be used for serious financial events such as losing a job or dealing with an unexpected medical expense. For things such as home and car repairs, create a separate budget and set aside that money outside your emergency fund. If you are a self-employed person or a single-income household, you may want to have closer to year's worth of expenses saved. This will give you more of a cushion if you were to be laid off.  Focus on Retirement- Once you're at least making progress with your emergency fund, you can work on saving toward retirement. A financial advisor can help you decide how much to start putting away, but 15% of your income is a good target to work toward. You can build up to this gradually as you get raises and pay off student loans.2 Contribute up to your employer's match into your 401(k), and then you can max out a Roth IRA. If you still have more to contribute, go back to your 401(k). Your contributions will add up over time. Work toward Other Goals- After you have your emergency fund and a growing retirement savings, then you can begin saving for other goals, such as a car, a down payment for a house, or vacations. By saving up for these purchases, you will save money on interest and free up more of your income so you can do what you want. You can track how much you have in each savings category so you know when you've reached your goals. The priorities for these goals should really depend on your personal situation and where you are in your life. If you want to buy a new house in the next few years, then that should come first. If you are getting married soon, then saving for your honeymoon may be your top priority. It is a good idea to save up for most of your major expenses, whether it is a home remodel or a dream vacation Start Investing to Build Wealth- If you have more available to save and you are really interested in building wealth, you can put additional money aside each month and begin to invest it in the stock market. When investing in the stock market, it is important to think long term. Mutual funds are often the preferred way to invest because they spread the risk over several different stocks. Many brokerage firms allow you to purchase mutual funds without a high initial investment if you are willing to do automatic contributions each month.  As you work to build wealth, it is important to have goals in mind for this money, too. It may be retiring early, being able to help your children through college, or purchasing a vacation home. You may want to leave a good inheritance to your children.  KEYWORDS - Emergency funds Focus on retirement Other goals Investing in the Stock market PREPAEWD BY POMPI BORA FINANCE (INTERN)