Pay yourself
Even if you can't save much every month, save something. First you'll need a fund that's just for emergencies, circumstances like job loss, medical bills or other unforseen events.
Once you've established an emergency fund, set your sights on a goal. Perhaps you need a new car or want to plan a vacation. Finally, your savings plan should include long-term goals as well,
such as retirement, down payment on a house, and education or your children
What you should know:
- Employers often offer automatic deposit from your paycheck into your savings account, which can be easier than finding the discipline to make the deposit yourself every month.
- If you don't have that option, use your bank's online service to make your own automatic transfers.
- When you get refunds, pay raises or bonuses, think of them as extras and deposit them directly into your savings account.
- You may be able to generate your savings fund from some of your curent expenses. Can you:
- Live without a land line? Cable?
- Use public transportation sometimes?
- Shop for a better monthly phone or Internet plan?
- Drink one fewer latte per week? (That's $15 per month!)
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Health care
It's no secret: Health care is getting more expensive every year. Imagine the burden on your checking account if you owed an emergency room several thousands dollars for a rountine injury or ilness, not
to mention an unexpected surgery. Don't get caught off guard and end up in debt--find the right health insurance plan, budet for the monthly payment, and don't get derailed from you financial planning track.
If you're healthy and you don't make many trips to the doctor every year, the most affordable option is probably a high deductible plan, where you pay a smaller amount every month but more out of pocket when you see a
doctor (but still much less than if you have no insurance). Another way to save on health-related costs is through a health saving account (HSA) if your employer offers it. The HSA deducts money from your paycheck before
taxes--so you pay less in taxes--and then you have a savings account set up solely for health care expenses, which includes everything from glasses to medication and office visits. Sometimes a separate health care budget
can give you a clearer picture of everything you spend on healthcare, helping you to see where you might cut back, or if you might be better off financially with another type of plan.
Health insurance is definitely worth buying and paying for every month. The alternative is an even more expensive set of unexpected costs. Research health plans offered by your employer, or learn about the different types of plans.
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Emergency fund
Your emergency fund should be first on your list of savings goals. Most experts recommend setting aside three to six months worth of expenses that you can draw on in case of unexpected circumstances, like medical bills or job loss. Keep your emergency fund in a regular savings
account or money market account; both will allow you quick access to your money. But remember that once your emergency fund is established, you should never draw on it unless you absolutley need it. It will draw interest in the meantime, and pay big dividends for your peace of mind. |
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Child care
When you’re building a new budget or thinking about planning for your future, don’t forget to consider child care as an expense. Maybe you don’t have children now but are planning for a family in the future. How will child care costs affect your job flexibility, ability to buy a home, or retirement savings?
Most child care providers ask for a flat monthly rate based on either full- or part-time care. Rates vary depending on where you live, so do a little research. Find out what most licensed centers in your area charge and then call some licensed in-home providers to compare costs. |
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Retirement
If you set aside $200 every month starting at age 25 and never increase your monthly contribution, your retirement account will generate around $827 per month in income--for 30 years--when you retire at age 65. If you don’t start saving until you’re 45 and then set aside $500 per month, you still won’t have as much monthly income when you retire. The compounded interest over time is the magic formula of retirement savings.
Of course it’s not very realistic to expect to start a retirement account until you have a job. You’ll also want to make sure your expenses and necessities--like an emergency fund and health insurance--are covered first. But then, as soon as you can, make sure “retirement” finds a place in your brave new budget plan! |
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