Photo: Steven Harrell
This guest post was written by Katherine Pilnick, a personal finance writer, blogger and editor for Debt.org, a financial help website.It’s never easy to take control of personal finances, but doing so can put your mind at ease and prepare you for anything the future may entail.
With an ever-growing pile of bills each month, it can be a struggle to make space in your budget for savings. Still, it’s important to set money aside when you can, and you’ll do better in the long run if you get a head start on savings.
By your mid-30s, you should have at least some money set aside for a few specific purposes. You should always have a small emergency fund, but you should also begin thinking about a retirement fund and, if you have children, an education fund.
Every adult needs an emergency fund, regardless of age. If you don’t already have a fund set up, make it one of your top financial priorities. Ideally, the emergency fund should be enough to cover your expenses for at least three to six months. That way, you have some cash to fall back on in case you unexpectedly lose your job, face a medical emergency or otherwise need money on hand.
If you already have an emergency fund, your next financial priority should be to start saving for retirement. It’s never too early or too late to start putting money aside to ensure comfortable senior years. With that in mind, experts agree that you should already have a retirement by the time you’re 35.
Aim to set aside a certain amount of money each month. Make your monthly goal low enough so you can realistically afford to stick to the plan, but also keep in mind that you’ll require a minimum amount of money to support you through retirement. As a good rule of thumb, you’ll need 80 per cent of your current annual salary for each year you expect to be retired.
If you have children or plan to have kids in the near future, it’s a good idea to think about their educations. Like retirement, your children’s higher education may seem like it’s in the distant future. Although you might not want to think about it yet, it’s best to plan early. Saving up over several years for such a big expense helps take the sting out of the high cost.
Saving for your children’s college doesn’t have to be a large chunk of your budget. If you don’t have enough saved up by the time your kids are off to college, you have options as a family. Your kids can choose less expensive schools, apply for scholarships or take out student loans.
It can be overwhelming to juggle so many financial obligations at once, but after some time, saving money will become second nature. It helps ensure that you’ll never run out of money, whether you lose your job, retire or pay your kids’ tuition. By saving now, you’ll be able to relax for years to come.