Kimberly Palmer: How to balance competing savings goals

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Saving money sounds simple—putting money aside for a future purpose—but in reality, people often face competing saving priorities. We want everything: the trip, the house, the savings account. So how do we figure out which savings goals to put first, especially when we’re working towards so many things at once?

“They’re also still trying to live and have fun and not eat ramen noodles every day,” says Al-Nesha Jones, a chartered accountant and founder of ASE Group, a full-service accounting, tax and consulting firm in West Orange, NJ. Saving is further complicated by the fact that we are currently faced with economic uncertainty, higher prices for everyday items and a turbulent stock market.

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Figuring out your saving priorities isn’t easy, but these strategies can serve as a guide:

PUT YOUR EMERGENCY FUND FIRST

Think about how you felt the last time you couldn’t cover an emergency, Jones says. “If it’s been really scaring you, keep that feeling in mind as you prioritize.” In other words, invest your emergency fund before anything else because it’s so important to financial security.

“Now more than ever, people understand the importance of having a fund for their down days,” said Eric Maldonado, board-certified financial planner and owner of Aquila Wealth Advisors in San Luis Obispo, California. “It’s a good basis to have cash in case things start to cost more.”

Next, prioritize retirement

“Retirement is a long-term game and time is on your side. Even if you start with something very small, the more time you put in to work on it, the better off you’ll be,” says Jones. “If you keep postponing retirement, we’re blinking and now we’re crawling.”

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Thinking through the worst-case scenarios of not saving for different goals can help underscore the importance of funding retirement accounts. Noah Damsky, director of Los Angeles-based Marina Wealth Advisors, says you should save for the highest-impact categories first — and retirement tops that list because nobody wants to be impoverished in old age. “Playing through these scenarios helps crystallize what’s important,” says Damsky.

DECIDE WHAT YOU WANT IN THE SHORT TERM

This next category of savings priorities is complicated because you need to set your short-term goals. This includes buying a home, traveling, moving to a new city, starting a family, or something else entirely.

Dale L. Shafer II, CFP and founder of Life Moves Wealth Management in Scottsdale, Arizona, recently moved his family from Michigan to the area and his near-term goal is to save up to buy a home there. The pandemic has prompted many people to make major lifestyle changes, he says, and as a result, their short-term savings goals have shifted.

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“Sometimes we reset expectations and sometimes we achieve more than we thought,” he says. It’s important to check your savings progress at least several times a year so you can recalibrate if necessary.

Jay Zigmont, CFP and Founder of Childfree Wealth in Water Valley, Mississippi, works with clients who don’t have or don’t want to have children. He says many of them are focused on big life changes, like starting a business, moving abroad, traveling or taking a break from work.

“You may not be able to do everything at once, but you can do most things over time,” says Zigmont.

STAY ORGANIZED

To keep all of these goals in mind, Maldonado suggests opening a separate savings account for each account and giving it a nickname, e.g. B. “Greece, $5,000” or “Sea Cabin Rental, $1,500”.

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High-yield online savings accounts typically offer higher returns than those at traditional banks, and you can set up automatic deductions from your checking account or paycheck. “It’s the positive inertia that keeps the money going where you want it to go,” he adds.

You can always make changes later. “Just get used to saving, and then you can go back and add other goals,” says Jones.

ENJOY LIFE ON THE GO

As important as it is to save for all of these priorities, so is enjoying life today. Don’t wait until you have a fully funded retirement to invest in things you enjoy, Jones warns. So she’s saving up for a Tesla she plans to buy by the end of the year.

Maldonado and his wife donate a fixed amount of money to a family account. “We dump it every quarter. It’s guilt-free spending for the family,” he says, moving toward camping trips, museums, or parties. With their savings safely stored in other accounts, the whole family can feel at ease.

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This column was provided to The Associated Press by personal finance website NerdWallet. Content is provided for educational and informational purposes and does not constitute investment advice. Kimberly Palmer is a personal finance expert at NerdWallet and the author of Smart Mom, Rich Mom. Email: kpalmerâ†*nerdwallet.com. Twitter: â†*KimberlyPalmer.

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