Savings and Investment Goals Everyone Should Have

There are some essential savings and investment goals everyone should have in order to be able to cover everything from emergency expenses now to living expenses after retirement and to build wealth!

From Saving to Cover Emergencies to Saving to Cover Retirement … Let’s Do it Right.

Before diving into these essential savings and investment goals you must have, listing your financial goals FIRST is super important to avoid burnout during the saving and investing stage of your financial journey. So, if you haven’t already, I highly suggest listing your financial goals first. We covered personal financial goals you must make for yourself in your lifetime here, for your marriage here, and for your children here. After listing your lifetime goals, we can determine which of those goals we can accomplish this year. We also covered how to maximize your income here. We covered how to begin to set up a budget here. And, we covered how to pay off your debts including mortgage loans, auto loans, credit card and student loan debt. If you haven’t downloaded your free budget template yet, you can do so here now and create a budget for this entire year!

We will be using the “Budget” tab on your budget template to help determine how much you can save and invest this year toward these essential savings and investment goals everyone should have below.

Savings Goals Everyone Should Have

Emergency Fund

The very first of the savings and investment goals everyone should have, BEFORE paying off your debt is to establish your emergency fund. If you are carrying credit card debt already, the last thing you want to do when an emergency arises is to add to your credit card debt. So, here is the proper order of financial priorities to establish your emergency fund:

• you will not add any charges to your credit cards that already carry debt
• you will pay all your bills as they are due and the minimums on all your debts
• and save as much as possible toward your emergency fund until it is fully funded

How much should your emergency fund be? A good rule of thumb is to have at least $1000.00 in savings (or the sum of your deductibles on your insurance policies i.e auto, home, and health) for emergencies like a car accident or home repair or medical emergency. In addition to the sum of your deductibles, you can add as much as you believe you need in order to cover repairs that are not covered by insurance. For example, if you have an older vehicle that is still worth repairing for a couple hundred dollars, when a part is worn and needs to be replaced, you can add that estimated repair amount to your emergency fund total.

Where should you keep your emergency fund? This should be kept in an account where funds are immediately available when an emergency arises. If you keep your emergency fund in an account outside of your bank, it will take at least a few days for the funds to transfer, which is not helpful in an emergency. So, you will have a savings account through the same bank where you have your checking account so that you can immediately transfer funds as needed.

Living Expense Fund

Life is unpredictable. So, while you want to ensure you are covered for emergencies as noted above, you also want to ensure you are covered regarding covering living expenses if or when you are in between jobs. So, the next savings and investment goal everyone should have is to establish your living expense fund. It can be impossible to predict when you will be able to obtain a job again, if you lose your job. So, to keep yourself from digging yourself into debt when your income ceases and you are reestablishing your income again, you want to save enough to cover your living expenses in the meantime. Here is the proper order of financial priorities to establish your living expense fund:

• establish your emergency fund as noted above
• pay off your debts
• and save as much as possible toward your living expense fund until it is fully funded

How much should your living expense fund be? A good rule of thumb is to save between 3-6 months worth of living expenses. You can either save 3-6 months of your income (to maintain your lifestyle) or 3-6 months of your living expenses (to cover all required expenses). I suggest saving at least 3 months of living expenses if you are younger and your job is easier to be hired for. I suggest saving at least 6 months of living expenses if you are older and your job is not as easy to be hired for. (“Older” and “younger” are relative to your specific field of work. In some cases, it does not matter at all.)

Where should you keep your living expense fund? This should be kept in a high yield savings account a.k.a. HYSA. Your standard bank will likely have very low APRs for accumulating interest. Keeping your living expense fund in an account with a higher APR like SoFi Money will allow this fund to grow while it sits. Join me on SoFi Money. You can save, spend, and earn interest—all in one account. Use my link here to sign up and you’ll get a $50 bonus.

Investment Goals Everyone Should Have

Retirement Investments

The next of the savings and investment goals everyone should have is to invest in retirement.

401(k) or 403(b)

If you have a job that offers these investment opportunities, TAKE ADVANTAGE. Does your employer offer a 401(k) or 403(b) (or a TSP for federal employees)? If so, do they have any special programs, like matching contributions? If your employer offers to match your contributions, this is the absolute best retirement investment. Every penny you contribute, up to an established limit, will be doubled. Additionally, that doubled amount compounds interest! This is the fastest way to grow your retirement investments under an employer, so take advantage of what your employer offers and maximize it the best you can.

If you are self-employed, the limit to contributing to your 401(k) is much higher than if you are under an employer! I won’t go into detail about it here as this is a whole article in itself. Just know that this is something you definitely want to take advantage of, and I will be showing you how to maximize your contributions to your self-employed 401(k) following our budget challenge, so stay tuned.

How much should you invest in your 401(k) or 403(b)? If I haven’t made it clear already, you should invest the maximum amount allowed!

Where should you invest in your 401(k) or 403(b)? Since these investment accounts are only made available through an employer, you will obviously invest through your employer. If you are seeking employment, you want to seek out a company that offers these benefits, especially if they match your contributions. If you are currently employed and come across an opportunity where you can be employed under another company that matches your contributions, you will likely want to take advantage of the new opportunity.

For the self-employed, you can choose between a Solo 401(k), a SEP IRA, a SIMPLE IRA depending on your business. SoFi has some great 401(k) options for business owners. I personally use Vanguard. I will share more on that in the future.

IRA Accounts

If your employer does not offer retirement investment benefits and you are not self-employed and, therefore, not able to establish a self-employed 401(k), you will want to contribute to an IRA account.

Also, if you contribute the maximum amount to your 401(k), you can contribute to an IRA account as well and maximize your retirement investments!

There are seven different types of IRA investment accounts. I won’t go into detail about those here. Just know that this is another retirement investment you want to take advantage of. Just like the 401(k) above, I will be showing you how to maximize contributions to your IRA account after our budget challenge.

How much should you invest in your IRA? If I haven’t made it clear already, you should invest the maximum amount allowed!

Where should you invest in your IRA? The best IRA accounts available can change throughout the years so you will want to do your research at the time you are reading this. Currently, SoFi has one of the top IRA accounts. I used Vanguard to establish my SEP-IRA before transitioning to a Solo-401(k).

Here is the proper order of financial priority before you contribute to your retirement fund:

• establish your emergency fund as noted above
• pay off your debts
• establish your 3-6 month living expense fund in an account with a higher APR
• contribute up to what your employer matches in your 401(k) or 403(b)
• contribute the max amount allowed this year toward your IRA account or as much as you can
• contribute above your employer match and up to the max amount allowed this year toward your 401(k) or 403(b) or as much as you can

Notice how I list contributing to a 401K at two different times above? It is because prioritizing your investments in the order listed above allows you to truly maximize your investment growth! We should always contribute as much as we can, first, toward the type of investment which historically grows the best.

BONUS: One other investment I want to quickly mention here is a Health Savings Account or HSA or a Flex Spending Account or FSA. For those of you who have a health insurance plan which also provides an HSA or FSA, your HSA or FSA can not only be used to pay medical expenses tax free, it is also ANOTHER investment account! If you can contribute to an HSA or FSA as well, do it! And, do contribute the max allowed, if you can!

How to Know if Your Contributions to Your Retirement Investments are Enough to Cover Your Expenses After You Retire

You may be feeling bewildered about paying off your debts and purchasing or paying off your home and vehicles and paying for college tuition for your kids and then their weddings and accomplishing all your financial goals (I know … that was a mouthful). How could you possibly contribute enough to ensure you won’t fall short covering your living expenses after you retire?

This is why it is so important to gather all your financial goals and required expenses over your lifetime to ensure that you are maximizing the best use of your income. As noted at the top of this post, we covered all these important topics through our budget challenge so far. We are the point now in our challenge where your budget begins to take shape. Let’s go over a few more investment goals you should be pursuing first, and we will complete the “budget” tab of your budget template to begin to maximize your budget for this year. Following our challenge, I will show you how to calculate your budget over your lifetime to ensure you are contributing enough toward your retirement investments.

529 College Savings Plans

The next of the savings and investment goals everyone should have is to invest in your childrens’ college tuition. HOWEVER, I include college tuition investments here with the disclaimer that the decision to contribute towards your childrens’ tuition should be based on your own conviction. There is no right or wrong decision.

If you decide to wait to pay for your childrens’ college tuition when they are at the point to decide if they even want to go to college or if you feel your children should pay for their own tuition if they decide to go to college, then you can move on to the next section about additional investments below.

If you desire to pay your childrens’ college tuition, contributing towards a 529 college savings plan for each child as soon as possible after they are born is your best bet for paying as little as possible as you allow your contributions to grow interest until each child is an adult. If you are deciding on contributing towards your childrens’ tuition later in their childhood, I share ways to reduce the cost of college tuition here.

How much should you invest in your childrens’ 529 college savings plans? Since there are so many varying factors with the cost of college tuition, it’s all up to you. Once you are able to consistently contribute the maximum amount allowed toward your retirement plans as noted above, thereafter is when you will want to contribute to your children’s 529 college savings plans. Prioritizing your investments is all a matter of giving higher yield and time bound investments priority.

Where should you invest in your childrens’ 529 college savings plans? This will depend on your state and the time you begin to invest. So you will want to simply research “the best 529 plans” and take advantage of the best rates!

Additional Investments

After you max out what you are allowed to invest toward your retirement, in order to continue to grow your money, the next of the savings and investment goals everyone should have is to also invest elsewhere, meaning, into a brokerage account. There are multiple ways to invest starting from the simplest of stocks and bonds to investing in real estate. Bottomline, whenever you can at whatever amount you can (every penny counts) … INVEST! The additional benefit to investing elsewhere (besides retirement accounts) is that you can withdraw these funds when you desire and use them for larger purchases (i.e. vehicles, vacations, etc.) prior to retirement.

Here is the proper order of financial priority before you contribute to additional investment funds:

• establish your emergency fund as noted above
• pay off your debts
• establish your 3-6 month living expense fund in an account with a higher APR a.k.a. HYSA (high yield savings account)
• contribute up to what your employer matches in your 401(k) or 403(b)
• contribute the max amount allowed this year toward your IRA account or as much as you can
• contribute above your employer match and up to the max amount allowed this year toward your 401(k) or 403(b) or as much as you can
• contribute towards your children’s 529 college savings plans
• contribute towards a brokerage account and/or in real estate (only after maximizing your contributions to the retirement investments noted above)
• pay off your mortgage or auto loans (don’t focus on paying off your mortgage or auto loans if your investment accounts are estimated to grow at a higher rate than your mortgage APR)

There are various ways to invest your money from stocks and bonds to investing in real estate. So, the choice is up to you. To jumpstart your investment journey, you can:

1. Join Robinhood with my link here and we’ll both get a free stock!

2. Use SoFi Invest to buy and sell stocks (and pieces of stocks) with zero fees. Open an Active Investing account here with $1,000 or more, and we’ll both get $50 in stock each!

3. Start your investment journey with 4 free stocks with Webull here. Open an account and get 2 free stocks! Deposit and get another 2 free stocks!

4. If you have at least $3,000.00 that you can invest now, I highly suggest using Vanguard as they are, historically, the best to utilize regarding investment growth.

Let’s calculate what you can invest for this year!

Creating Your Budget for This Year

Yay! We finally get to see your budget really start to come together. By now, you will have evaluated your expenses over the previous year and entered your estimated expenses for this year on the “Expenses” tab for this year of your budget template. If you haven’t already, you will

• enter your minimum payments for your mortgage and auto loans on the “Mortgage & Auto” tab
• enter your minimum payments for your credit cards on the “Credit Card Debt” tab
• and enter your minimum payments for your student loans on the “Student Loan Debt” tab.

Now, go to the “Budget” tab and you will see that all of these expenses have been automatically added to the coordinating expense columns. See how the numbers in the balance column are red? Remember, we want those numbers to be black because you never want to be “in the red” as this means you are over budget, and you always want to be “in the black” as this means you are within budget. To ensure you turn that “Balance” column black:

• in Column B, under “Income,” you will enter your gross income (income before taxes) for each month over the year
• in Column C, under “Giving,” you will enter the amount you desire to give for any charitable donations (do not add a “-” sign before the amount entered)
• in Column D, under “Taxes,” enter the total taxes deducted from your income for the month (do not add a “-” sign before the amount entered)
• in Column E, under “401K,” enter the total of your contributions for the month (do not add a “-” sign before the amount entered)
• in Column F, under “IRA,” enter the total of your contributions for the month (do not add a “-” sign before the amount entered)
• in Column G, under “Other Investments,” enter the total of your contributions for the month (do not add a “-” sign before the amount entered)
• in Column H, under “Savings,” enter the total of your contributions for the month (do not add a “-” sign before the amount entered)
• in Column I, under “Goals,” enter the total of your contributions for the month (do not add a “-” sign before the amount entered)

If after entering all your figures as noted above, your “Balance” is still in the red in any of the rows, or the amounts in black or your savings and investment contributions are not as large as you would like them to be, don’t worry. All next week, we are going to work on reducing your expenses and take every penny saved and apply it in the proper order to the appropriate financial priorities to truly maximize your budget!

An important note about building wealth: I quickly noted entering figures for “Giving” in the section above. Though it sounds contradictory, there is so much value in giving. We must have a healthy mindset about money, otherwise, the love of it can destroy our character. I talk about having a healthy mindset in order to be able to handle wealth here. A huge part of having a healthy mindset about money is to give. Recognizing that there is always someone worse off, that there is always someone else in more need, and consistently giving to help others will come back to you in unexpected rewards. And, recognizing that everything you have can be gone in the blink of an eye will keep you humble so that you do not hoard wealth.

I will be showing you how these savings and investment goals will be calculated more precisely into your actual budget by the end of this challenge. To get an idea of budgeting tasks you must be completing on a regular basis to build wealth, check this video out:

In order to know how to begin to create a budget and how to truly maximize your income and accomplish your financial goals, you must create a budget for your income now in order to use it in the most profitable way possible. So, if you haven’t downloaded your free budget template yet, you can do so here now and create a budget for this entire year!

Remember, after you create your budget for this year, I show you how it all comes together in a comprehensive lifetime budget that takes minutes a day to maintain.

In the next post, we go over how to reduce your regular expenses to bring you much closer to accomplishing your financial goals. Stay tuned!

Happy Budgeting!