Whether you have just started your first “adult” job or you have spent decades building your career, it is important to be financially prepared. Financial preparedness means you are ready to face unexpected expenses. Below are helpful tips to not only save money, but to be able to save more without squeezing every penny from your wallet.
• Contribute to your 401(k) to receive the full employer match. Many employers offer an employer match if you contribute a certain percentage to your 401(k) plan. This is free money so why not take advantage of this benefit? For example, if your employer match is 3% then contribute at least 3% towards your 401(k) to get the maximum match. The maximum limit you can contribute to your 401(k) is $18,000 (plus a catch-up amount of $6,000 for age 50 and older). Making contributions to your 401(k) will lower your taxable income.
• Build up your emergency fund. Building up an emergency savings is essential to protect yourself financially when you are hit with any unexpected expense. According to a new survey from Bankrate, 57% of Americans don’t have enough cash to cover a $500 emergency expensei. The rule of thumb is to save at least 3 to 6 months, or more, of living expenses and it is recommended to keep your emergency fund in a liquid FDIC-insured account. Consider holding your emergency fund in a savings account where you can earn interest. I personally have found it better to keep my checking account separate from my emergency fund. This way I am not tempted to spend my emergency fund, but I know the cash is there if needed.
• Health Savings Account (HSA) – If you are enrolled in a High Deductible Health Plan (HDHP), a HSA allows you to set aside pretax dollars for qualified medical expenses. You can invest your HSA account with investment options provided by the carrier and the earnings grow tax-free. The maximum limit an individual can contribute to a HSA is $3,400 (extra $1,000 catch-up if age 55 or older). If you can’t contribute the maximum, consider contributing enough to cover your deductible or your expected medical expenses for the current year. To learn more about HSA’s, please check out 7 Facts about Health Savings Accounts That You May Not Know About.
• Save on your student loans. Consider consolidating and refinancing your student loans to reduce your monthly payments and to lower your interest rate. There are a number of strategies you can use to pay off your student debt including paying off interest early and refinancing. Learn more strategies to help pay off student loans here!
Maintaining financial discipline can be a difficult hurdle. Setting up automatic transfers towards your savings can help build your savings account. It can also help pay down debt and reduce the temptation of spending. If you can live within your means, know what your priorities are, and set goals to build up your savings, then you will be able to establish yourself financially.
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