Even if retirement is a few decades away for you, there's a chance you're feeling behind on your future savings!
Have you ever felt behind on your savings? Or a better question might be; have you ever felt on top of them?!
If you're feeling stretched in areas like building up savings and paying off debt, chances are you have felt behind on your retirement savings too. A few years ago, as a 20-something millennial that was aggressively paying off student loans, I didn't know that I also should have already started saving for retirement. I thought I knew about retirement, that it was a time in your life when you were older and could stop working. To me, retirement was an age. I now realize that this is a misconception, and that thinking this way is causing a big problem...
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The extension for 2019 taxes also impacts IRA contributions, which means you could be in an extended “sweet spot” for catching up on savings.
Saving for retirement is a hefty topic, one that many like to put off until it is arguably “too late”. As the saying goes ‘the best time to plant a tree was yesterday. The second best time is today”. This saying applies to saving for retirement perfectly. When I was a financial advisor and working with retirees on a daily basis, one thing was said again and again... “I wish I had known more about investing when I was younger.” Why do so many people say that? Well, once you have had money invested for a while, you truly understand the magic of compounding interest. And what’s compounding interest’s best friend? Time. Time is the reason a saver who starts investing $500 a month from age 20 (and earns an average of 7%) could retire with over $1.2 million. But if they wait until age 30? The ending balance is less than $600k. You need two things to grow wealth, money and time. You only need to have a lot of one of those things.
So far, 2020 has been a wild year for retirement savers. If you aren’t saving yet, you might find this the perfect time to start... 
What you should consider before spending all of your stimulus check
The middle of April 2020 is certainly... not how it normally is. April 15th usually marks the dreaded “Tax Day”, but this year we are replacing our fear of taxes with a fear of contracting COVID-19. Taxes are taking a backseat until July, and there are some other new and monetarily stimulating things going on, like surprise checks and paused student loan payments. If you woke up to an extra one or two thousand bucks in your account this week, you might be wondering “what should I do with this?” and “are there strings attached?”. Before you swipe your card on that brand new flat-screen TV, let's take a look at the fine print, and consider some good places to put that stimulus moolah.
It's easy to see the importance of a healthy emergency fund, especially in this uncertain time as the corona virus pandemic continues. But where should you start?
Let’s break it down.
What exactly is an emergency fund?
I’ll give you my definition, but I think it’s also important for you to create a definition of your own.
An emergency fund is money that you have saved and set aside specifically for emergencies. This should be held in cash for liquidity reasons, and easy to access if it’s needed on short notice. Now, I don’t mean in literal stacks of cash tucked under your mattress, I just mean it shouldn't be invested in stocks or real estate, and it’s not in some weird, faraway account that will take 7 days and your first-born child to transfer into your checking account. The best place for your emergency fund is a savings account or a high-yield savings account. But… what constitutes an emergency? This is something you get to decide, and I suggest you know what emergencies look like for you so you can both: a). Have self-discipline and not dip into your savings unnecessarily for stuff that isn’t actually an emergency and b). Not be hard on yourself when you DO have to dip into your emergency fund... |
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