With the start of a new year, now’s a good time to assess your financial goals. And if you don’t have any financial goals hammered out, now’s a good time to create some!
Your financial objectives will likely vary depending on what stage you’re at in life and what you hope to accomplish. They could range from buying a new car to saving for a luxury vacation.
No matter what your goals are, the first step in reaching them is to establish a budget. Having a structured financial plan that constantly tracks your income and expenses makes it easier to attain your objectives.
One of the most beneficial things about creating a budget is that it forces you to examine your “needs” and your “wants”. Your “needs” are those expenses that are critical and non-negotiable. Examples would be your rent or mortgage payment, car insurance, utility bills, child support payments, and medical bills. Your “wants” on the other hand are things that you could live without, such as cable, daily lattes, spa treatments, and restaurant meals.
Once you determine how much money you should stash away each month toward your various financial goals, you may find that you’ll need to tweak your monthly “wants” in order to do so. This could mean canceling your cable subscription in order to free up more of your budget, or it could mean cutting back on the number of times you eat out every month.
It’s also important to determine where you’re going to stash your savings. Many people find it’s easier to stay on track with each individual goal if they have a dedicated savings account for each one. But keep in mind that a traditional savings account may not necessarily be the right fit for each of your goals.
For example, if you’re saving toward a long-term goal, it might make sense to open a Money Market account, which typically has a higher interest rate than a traditional savings account. There are also some Certificate of Deposit (CD) accounts, like Bank5 Connect’s Investment CD, that allow you to make deposits whenever you’d like. But since most CDs do have penalties for withdrawing money before the CD matures, it’s important to choose a term length that coincides with your savings goals.
There are also some specific types of accounts that are useful for particular goals. For example, two of the most popular savings vehicles for retirement goals are 401K accounts and Individual Retirement Accounts (commonly referred to as IRAs). Likewise, 529 Savings Plans and Coverdell Education Savings Accounts are popular choices when saving for college expenses.
There are also savings accounts out there with very competitive interest rates. These are typically called “high-yield” or “high-interest” savings accounts. Just be sure to read all of the fine print associated with the account before opening one, as many higher-interest accounts come with conditions such as minimum balance requirements or monthly maintenance fees. If you’re looking for a high-yield account without a lot of red tape, a Bank5 Connect High-Interest Savings Account could be good choice. This account only requires a minimum balance of $100 to earn interest, and has no monthly maintenance fee.
When choosing which account is right for your savings goals, just keep in mind that it’s always a good idea to consult a financial professional or tax advisor before making any major financial decisions.
No matter what your financial goals may be, establishing a solid game plan is the first step in achieving them. By putting together a budget and choosing the right type of account for your saving needs, you’ll be well on your way to accomplishing your multiple goals.