I know a girl never tells her real age. But I admit it. I turned 40 this year. And true to my nature, I pulled out a number of lists that are important to me. How many states have I visited? (35) How many continents? (North America + 3) Learned to cook recipes that scare me, like crepes and whole fish and my best friend’s mom’s strawberry pie? Check.
But it also got me thinking about my long-term savings plans and where my husband and I want to be in 5 years, 10 years, 30 years. I believe it would be helpful to share our planning and the steps we’ve taken this year to expand our savings into savings-for-life.
Step 1: Emergency Stash
Do we have at least $1000 in case of an emergency without having to borrow? Technically, this could be a floating balance in your checking account or money in your sock drawer, but we’ve found a savings account at the same bank as our checking is a perfectly good holding tank for small(ish) funds to keep them very liquid.
Step 2: Six Months Savings
Do we have at least 3 months, preferably 6 months of living expenses in liquid reserves to tide us over if we both lost our jobs and needed to pull from savings for an extended period? Hopefully, this will never happen! But we chose to leave this fairly liquid. We put 3 months of net income into a “high” interest online savings account that earns about 1% annual rate. Money markets or other fairly liquid options work for this, too.
Step 3: Matched Retirement Investments
Do we already have the emergency stash and a positive budget working toward the 6-month savings? Once we said yes, then we talked with our employers about any matched retirement savings. Many will match dollar for dollar up to a certain amount. That means a huge boost to your retirement without all the funds coming out of your pocket. Plus, it’s automated with your paycheck, so it’s super easy to stick with the plan.
Step 4: Long-term Growth
Are we seeing continued growth in savings, so that we could invest the extra without losing immediate security in an emergency? I word the question carefully, because I know myself. I have a friend who is a market analyst and a highly enjoyable and motivating extrovert. He naturally effervesces when he talks, and his work is no different. Whenever we have a chance to talk money, I come away from the conversation excited about opportunities for growth. It’s a great reminder to check out options for stocks and mutual funds either through personal research or with my investment banker. But realistically, only money not earmarked for more liquid savings should go there. Likewise, I hear many clients talk about purchasing a second home as an investment. That also falls under the category of long-term (and even less liquid) investment, though both can yield wonderful returns if used wisely.
Final Thoughts on Saving for Life
As always, consult your Financial Advisor to get his/her expert opinion on financial planning and retirement savings. Also, stay “tuned” to our blog this month for more saving for life tips. If you have questions or want to start the journey yourself, Apprisen would love to partner with you to prep your budget for this key step towards financial health–saving for life!