By Lindsey Smith

January means a new year, which for most of you means it’s time to think about your New Year’s resolutions. You may have decided to commit to being better organized or getting into a workout program, or maybe you’ve decided to take it easy this year after getting through the last 12 crazy months. Whether you have personal goals for 2021 or not, it’s never a bad time to think about boosting your financial health. It’s easy to be overwhelmed by the prospect of getting your finances in order; however, the new year is the perfect time to start figuring out your savings plan so you can start your year on the right track.  

The chaos of 2020 made it a very stressful time for families, whether it was due to financial issues, health issues and more. You may feel right now like you’re still in survival mode, just trying to stay healthy enough to continue going to work to get the essentials you need. Even with all of this stress and worry, there’s a bright side. You’ve been through a situation you never thought you would have to face and now you know where your financial plan is weak. You may be thinking, “Great, now how do I fix it?” We can help. At Availa Bank, we’re committed to helping you save for your future, so you never have to panic about when and where your next paycheck is coming from.

How Do I Create a Savings Plan?

When you’re first starting out in the financial world and are trying to determine what your budget and savings plan should be, it can be hard to weed through all the advice on the internet. To be honest, every person’s financial situation is different, so it is nearly impossible to find a plan that will 100% work for everyone. It takes a lot of trial and error to find a solution that works for you. However, keeping track of your monthly bills and payments can help you start formulating the most effective savings plan for now, keeping in mind that as you switch jobs or get promotions that your budget also needs to change.

How Much Money Do I Need to Save?

A question that I see a lot from first time budgeters is “How much should I save?” This is a complicated question. You may have heard some advice on how much money you should have saved by a certain age, but this can also change depending on your needs. A good rule of thumb is to have 1x your income saved by age thirty, 2x your income by age 35, 3x by age 40 and so on. You should aim to save 15% of your salary for retirement each year, even if you have to start with a lower percentage and add onto it to reach that 15% later on.

What Should I Be Saving Money For?

Now that you know how much money to save, do you know how to prioritize your savings each month to maximize your investments? If you said no to that question, don’t worry. Many people don’t. However, it’s easy to see where your money should go when you take the following categories into account:

  1. Your current debt
  2. Your future debt
  3. Emergencies
  4. Medical issues
  5. Education
  6. Children
  7. Vacation
  8. Retirement

Getting Rid of Your Debt

If you look at #1, your current debt, it’s self-explanatory. If you have a lot of debt, you need to eliminate it to begin properly saving. This is especially important if your loan interest rates are high. You may have to adjust the money you spend on things you want to cover more of your debt. It’s important to save, but savings start to crumble as your debts grow.

Avoiding Future Debts

Now, let’s look at #2, future debts. Nobody wants to be in debt later in life. Maybe you’ve already created a five, ten, or fifteen-year plan to make sure you have money saved for other things. However, even if you make a detailed plan, life tends to bring you unexpected surprises. You may need to move to a new town quickly for a new job opportunity. You may be diagnosed with a serious illness and not be able to work. Maybe you started a small business venture that didn’t quite make the profit you hoped it would and now you’re struggling to pay the bills. No matter what happens, you probably don’t have tons of extra cash lying around in your bank account right now to cover these expenses, especially if you’re just starting out with your financial planning. Having a savings plan to accommodate these future challenges helps. Lucky for you, there are plenty of free resources online to help you develop a savings plan for your specific situation and stick to it.

Prepare for Emergencies

Practically speaking, emergencies and medical issues often overlap, so a similar savings strategy will typically work for both. You can’t plan for every emergency, but you can plan to save for them. If your house is damaged in a storm, if you get in a car accident, or even if you are diagnosed with a serious disease that has an expensive course of treatment, it’s important to have a back-up plan. Emergency savings accounts and health savings accounts can help you prepare for the times in life when everything feels uncertain. Availa Bank has a number of savings options to fit your needs, which you can check out here.

Educating Your Children

Education and children are two very expensive choices in a person’s life. If you’re planning on saving for your own education, you’re going to want to start as early as possible. If you’re past your school years but want to start making a plan for your own children, it’s important to start as soon as possible as well. Education savings accounts can give your children a step up without having to worry about significant student loan debt after graduating from college. It’s easy to save a little of your paycheck every month when you set up your account with an informed Availa banker. Besides your children’s education, it’s also important to remember that kids cost a lot of money on their own. In America, the average middle-income family will spend $284,570 per child by the time that child turns 18. After hearing those figures you may be feeling a little sick, but don’t worry. The key is to start early. Even a little money in savings is better than never having started at all.

Saving for Fun

If you’re like most Americans, you’ve probably always got category #7 on your mind. Everybody wants to go on a nice long vacation, but a lot of the time we make excuses not to go based on work schedules being too hectic or not having enough money saved to “really have fun.” That doesn’t have to be the case. If you’re thinking of going on a vacation, scope out the best pricing for where you’d like to go, then make a goal each month to save some back. It’s okay to separate your savings into wants and needs, as long as money is still being saved for the important things.

Investing in Your Retirement

Finally, let’s focus on your retirement. When people talk about savings, one of the first things that comes to mind is a retirement fund. This is what makes category #8 one of the most important things to save for and one of the most ignored. According to a study conducted at the beginning of 2020, 54.29% of people in the U.S. aged 45-54 are not saving ANYTHING for retirement and of those that do save, 69% of them have less than $1,000 in their savings accounts. Depending on your health and the status of the economy, retirement can come sooner than you think. As we’ve learned this last year, anything is possible. You want to be prepared for everything that can happen as you age, whether that means saving more for your health, saving for fun vacations, or even putting money aside for the grandkids. You’ll want plenty of money to support your hobbies, travel, and more.

To Summarize

In the end, it’s important to remember that savings are specific to you. You can follow the basic guidelines, but only you can determine where your money should really be going. You have to know what you will need money for in the future and give yourself a little cushion if things go wrong. Most people estimate you will need to save $1 million for retirement, but that could be higher or lower for you depending on the circumstances. Be honest with yourself and make sure you cover all the bases. Planning ahead is never more important than now. You won’t regret it.

Got more questions on how to save and what to save for? Give one of our experienced bankers a call today!

General

Availa Bank locations are in the following communities: Carroll, Ames, Ankeny, Arcadia, Coon Rapids, Council Bluffs, Fort Dodge, Holstein, Jewell, Nevada, Roland, Sioux City, Pocahontas, and Webster City. For more information about Availa Bank, visit the website at www.Availa.Bank and follow them on Facebook. Member FDIC.