Life is exciting, and you always have a choice to make when it comes to spending or saving. However, with every choice you make, you may also be choosing to not do something else.
For example, spending a lot on little things now may mean that you won’t be able to save money for life’s milestones later.
Milestones often seem far away, but life comes at you fast. So if buying a home, paying for education, and having a healthy retirement are goals of yours, then saving for them now has to be a priority.
In times of economic hardship, it can be especially difficult to set money aside. What we learn in this episode is that economic downturns will continue to happen - but so will economic expansion.
That’s why it’s especially important to save when times are good - so that you have money to fall back on when you may need it in the future.
When reaching life’s major milestones, you often have the choice to either save in advance, or go into debt when that time comes. Examples are:
College savings - You can either take out student loans or save in advance using a savings vehicle such as a 529 College Savings Plan.
Buying a home - While most people can’t purchase their first home outright, you can save for a down payment. If you do not have enough money for a down payment, you might have to take out an FHA loan to cover the down payment.
Retirement - It is important to take advantage of compound interest by saving for retirement early. You can join your company’s 401k or 403b, start a Roth IRA, or contribute to a SEP IRA. Alternatively, you can work longer and live off of a fixed income such as your Social Security, which typically covers minimal expenses in retirement. If your company offers a match on your retirement plan, you should take full advantage of it.
Ultimately, saving early and saving enough is very important, and should be factored into your monthly budget.
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THIS WEEK’S CHALLENGE:
Figure out which of the major milestones is next up for you.
Once you know what your next major milestone is, start planning how to incorporate it into your savings journey. The first step is to get an overview of your finances, then decide how much you can contribute, and how often.
And remember, by listening in and wanting to take control of your finances, you’re already off to a great start!
