Here’s how to prioritize goals to make saving be more effective:
-
Contribute to your company’s retirement plan up to the maximum employer match. Even if money is tight and you have multiple priorities, make it your first goal to contribute at least enough money to get all the matching funds your company offers. It’s free money! Look iat it as a guaranteed return on your investment.
-
Pay off high-interest-rate debt like credit cards. Use the debt-snowball method to pay off the accounts with the highest interest rate first. Once one account is paid off add the money you were sending to that account to pay off the next highest rate account.
-
Create an emergency fund to cover at least three months of essential living expenses, and preferably six months. This will help you keep from dipping into long-term investments or borrowing at unattractive rates when you need cash in a hurry.
-
Contribute the maximum allowed to tax-advantaged retirement accounts. For example, if you’re saving only enough to capture the match in your company’s retirement plan, increase it to the maximum allowed. Or fund an IRA. The more you set aside, the more secure your retirement may be.
-
Save for a child’s education. To handle rising college costs, make the most of tax-advantaged 529 savings plans.
-
Save for the down payment on a home.
-
If you already hava mortgage start to pay it down early. Reducing high-interest-rate debt—even if it’s a tax-deductible mortgage, home equity line of credit or student loan—can enhance your ability to save in the future.
-
Keep investing. To stay ahead of inflation, your money needs to earn more than many traditional savings accounts pay. The first step to long-term investing success is to get going right away and making it automatic.