With inflation and rising interest rates, many have found it more challenging to save money. This goes for retirement savings, saving for big expenses, and also for emergency savings. It’s time to put savings on top of your financial goal list. While prioritizing saving in an uncertain economy might be difficult, it is doable if it remains your focus throughout the year. The key is working to find a balance to accomplish all of your saving goals.
Build an adequate emergency fund
Have you neglected your emergency fund over the past year or possibly longer? You may have thought it was more important to focus on retirement savings, leaving you with no rainy-day fund. If so, you are not alone. Most experts believe you should have an emergency savings fund that can cover at least 3 to 6 months of living expenses in the event of an emergency. This would include housing, utilities, food, transportation, healthcare, childcare, debt payments, and necessary personal expenses.
If you are not anywhere near where you need to be with emergency savings, start stashing away as much as you can afford right now. Start small, save regularly, and you will meet your goals in time. Benchmark Federal Credit Union has many savings options for your emergency fund, from our Free Ultimate Saver to our High Yield Savings Account, Money Market Account, Certificates, and more.
Give your retirement savings a boost
If your retirement savings have suffered because of strain on your budget, it’s time to give it a boost. Financial experts say you should aim to save at least 15% of your annual pre-tax income for retirement. This amount would include any employer match. This amount assumes you begin saving for retirement at age 25 and retire at 67. Depending on your age and lifestyle, you may need to save more. For example, if you don’t start saving until you are 35, the suggested rate of savings goes up to 23%.
For 2023, the contribution limit for employees who participate in 401(k) plans has increased to $22,500. If you are receiving an employer match, it is important to always contribute enough to get the full match. There’s nothing better than free money after all. Most employers offer some type of match on your contributions. Once you meet your match and get your free money, you can focus on your emergency savings as well. If you are contributing to a traditional or Roth IRA, the total contributions you make to each in 2023 cannot exceed $6,500 or $7,500 if you are age 50 or older. Benchmark FCU offers both traditional IRAs and Roth IRAs.
If you’ve fallen behind on retirement savings, read our “Tips to Catch Up on Retirement Savings.” and “A Guide to Retirement Savings by Age.”
Challenge yourself to save
In these times of uncertainty, control what you can, which includes prioritizing saving. Learn to adapt and be flexible with your budget to build an adequate emergency fund and save for retirement. This may require a fresh look at your budget to evaluate, reprioritize, and focus on your savings goals. It may also necessitate cutting back on spending, taking on extra hours at work, finding a part-time job, or starting a side hustle. In the short term, you may need to supplement your income to adjust for inflation and help you meet your savings goals. Finally, arm yourself with the right savings products, such as the Benchmark FCU savings options we mentioned above. Stay motivated, don’t lose sight of your financial goals, and prioritize savings in an uncertain economy.
If you are finding it difficult to budget for savings, read our blogs “7 Steps for Creating a Budget You Stick to” and “Budget Fixes to Fight Inflation.”