You can do anything with your money, however, there are things everyone should be saving for. It doesn't matter how little or how much you earn, saving should be a priority. This is a key element of any financial plan. But it isn't always enough to open a savings account. You also need to establish a few savings goals. Here are seven things everyone should save for.
1. A House
A down payment is one of the things everyone should be saving for. Of course, this savings goal depends entirely on whether you want to purchase your own house in the future. Home ownership is a common goal. Unfortunately, reaching this goal will require a down payment of at least 3.5% for an FHA home loan and 5% for a conventional loan. The earlier you start saving, the sooner you can purchase a home.
2. A Car
If you have good credit, most dealerships do not require a down payment. However, a down payment reduces the amount you’ll need to finance, plus it can help you negotiate a better interest rate on the car. For this matter, if you plan to finance a car in the near future, start saving and aim for a down payment of at least 20%.
3. Your Next Vacation
It's easy to fall into a routine of going to work and paying bills. But you work hard, thus you deserve an annual or bi-annual vacation. The same way you make paying bills a priority, start a vacation fund and deposit a certain amount into this account each pay period. It doesn’t matter whether it takes a year or longer to finally afford a vacation - at least you’re working toward the goal.
4. Your Kid’s College Education
With the average cost of a four-year degree around $20,000 for public colleges and universities, you can't afford to put off saving for your children’s education. The earlier you begin, the better. Talk with a financial planner and ask about 529 savings plans, or open a separate savings account and start setting aside money for their education.
5. Your Retirement
You're never too young to start saving for retirement, yet some people don't explore their options until their 30s. However, you should enroll in your employer's 401(k) plan as soon as you're eligible. Additionally, look into other retirement savings options, such as individual retirement accounts.
6. Potential Job Loss
If you’re doing an excellent job at work and your company seems stable, losing your job may be the furthest thing from your mind. Just know that it can happen. And in the event of a job loss, you'll need a financial cushion to carry you until another job comes along. Put money in an emergency fund each paycheck and you’ll slowly build your cushion.
7. Other Luxuries
If you’ve been eyeing a new flat screen television or perhaps a pair of expensive shoes, pulling out your credit card might be an option. But why go into debt when you can save up and pay cash? This way, you own the item free and clear, and you don’t have to deal with interest charges.
Whether your goal is to buy a house or take a fabulous trip, a solid savings plan can make your dream a reality. It’s takes discipline and sacrifice. But saving money becomes easier once you get into the routine.
What things are you saving up for?