Most people start thinking more seriously about their finances as they get older and their priorities begin to change. When adults reach their late 20s or early 30s, they may want to get married, start a family, purchase a home or save more consistently for retirement. These goals, when assessed all at once, can seem daunting for individuals who have not yet begun amassing cash reserves or sticking to a rigid money management plan.
“Most people live the lifestyle they want without putting away enough to meet the goals they want later on,” certified financial planner Jim Oliver told Kiplinger. “It’s like having a budget for a trip and not allocating it. Before the trip is over, they run out of money.”
As with any type of large financial undertaking, it’s important that individuals make a list of their priorities, and how much they aim to save so that they can meet them within their timeline. Doing so allows them to break down how much money they should put into a savings fund each month, and organize their budget around this figure.
One of the roadblocks many new savers come across is that their existing spending habits do not allow them to easily devote sufficient funds to an account to meet their monthly goals. Saving for a home, wedding, new baby or retirement takes commitment, and adults must be willing to make significant lifestyle changes in order to build a strong financial profile. This may mean eliminating wasteful spending and cutting back on little luxuries, such as dinners out. Over time, however, these smart habits may become more ingrained and allow consumers to consistently save more money.
Plan for the unexpected
Putting funds away for life goals is important, but protecting the income that has been contributed to an account or certificate of deposit is equally crucial. When individuals are padding their wallets for a specific priority, they may forget to save for contingencies. A sudden job loss or medical bill can unravel all the hard work a person has done by forcing them to use their seed money to cover these costs. To avoid this issue, it’s advisable that individuals also build an emergency fund that may cover roughly three to six months worth of living costs should an emergency occur.