When it comes to finances, the cost of waiting can be detrimental. You’ll hear very few people say, “I wish I hadn’t started to save so early.” Many people regret not saving soon enough. This applies to any kind of savings – whether it be for emergencies, financial dreams or retirement.
Bucket 1: The Emergency Fund
Life is full of surprises, and sometimes these unexpected events can be costly. This might include losing a job, having a medical emergency, repairing your car, and more. Having money saved to cover some or all of these expenses can help reduce stress and financial devastation.
Ideally, your emergency fund should have 3-6 months’ worth of living expenses here. To calculate how much this is, add up all your monthly bills and expenses and multiply by at least three.
More than half of Americans have less than $500 saved in their emergency fund. If you don’t have much of an emergency fund, start saving as much as you can now. If you’re able, we recommend allocating 10% of your net income to your emergency fund. Saving some and having a small emergency fund is better than not saving at all.
Bucket 2: Retirement
Albert Einstein considered “Compound Interest” the most powerful force in the universe. He explained that the length of time your money is working for you, compounding, the greater the return. This is especially true when it comes to retirement savings.
We recommend saving at least 10% of your gross income for retirement. There are several different types of retirement plans that can help you save for retirement. These include Traditional IRA, Roth IRA, 401(k) or 403(b) offered by your employer, Solo 401(k), SEP IRA, Simple IRA, and a Health savings account. Click here to learn more about saving for retirement.
Bucket 3: Your Financial Goals
This bucket is for your short to mid-term financial goals. These goals might include college savings, a down payment for a home, home renovations, or a vacation.
Your disposable income can help fill this bucket, which is anything left over after allocating money to buckets 1 and 2 and paying your monthly obligations. If you’ve managed to fill bucket 1 already, you can use that cash to start filling your financial goals bucket more quickly.
AHFCU offers a wide range of savings and investment accounts to meet nearly all members’ needs. Our savings and investment accounts are federally insured by the National Credit Union Administration (NCUA). To learn more or to open an account today, call 562-933-0370.