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The savings goals you should be reaching

We all know it is important to build our savings and the positive impact that developing a savings habit can have on your overall financial success. With the US household savings rate still hovering around 8% according to the US Commerce Department, it is clear that not everyone is saving as much as they should be saving.

What should be the first savings priority for everyone?
Without question, it is your retirement savings and this should start very early. It is best to reach the 10% level as quickly as possible and maintain that most of your working life. The sooner you start and the quicker you attain the 10% savings rate the more likely you are build your desired retirement nest egg.
What do you consider be the second most important savings goal?
It is definitely building an emergency fund, the account that you tap when something unforeseen happens and you need a large influx of money. The goal is to save at least three months and up to nine months of living expenses.
Is there another savings goal that should be a priority?
A great third goal is building your health savings account as it provides a tax advantage account that can be used in retirement for health expenses. If possible, build your Health Savings balance and use other funds to pay for your medical expenses while you are working. The goal should be to reach the Health Savings Account maximum each year.
Can we calculate our own personal saving rate?
Maybe not exactly as the government defines the personal savings rate but we can all calculate our own savings rate by simply dividing our monthly after tax income before 401k contributions by the amount of money we are saving each month for long term needs. This should include any company match funds as well.
Should we include short-term savings like vacation or holiday funds as part of our personal saving rate?
Even though it is great to save for these expenses, in calculating your personal savings rate, these shouldn’t be included. Only savings that you don’t plan to use within the next 1-2 years should be used in this calculation.
What would you suggest as minimum for a personal savings rate?
I would suggest that everyone’s personal savings rate needs to be at least at 10% as long as most of that is directed towards retirement savings. Because a company match can be included in this calculation, the threshold is rather low for how much would need to come from monthly income to attain this goal.

Posted: 10/4/2019 with 0 comments

Categories: Investments, Money Matters, Retirement, Saving

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