Planning For Short-Term Goals Without Sacrificing Long-Term Savings | Ep. 262

Intro/Outro: You know what it is. That’s right. It’s time to talk money with your money, nerd and financial coach. Now tighten those purse strings and open those ears. It’s the money talk with Tiff podcast.

Tiffany Grant: Hey, Hey, and welcome to another episode. Of Tiffany’s take where I answer your many questions right here on the podcast.

So if you have a question, feel free to go to www.moneytalkwitht.com/tiffany and I’ll be more than happy to answer. So I got a. Good question. Um, that came through last week and I want to go ahead and address it on the podcast this week. So someone asks, would you be able to talk more about best practices for savings?

I typically hear 10 to 20 percent of your income, but where should that all go? Let’s say your emergency fund is fully funded. What do you recommend as far as how much goes to online savings account 401k Roth or traditional mutual funds, stocks, et cetera. Um, a lot of the advice I get is to put as much as possible into retirement, but as I’m away from retirement, how can I make sure I have funds for things I’ll encounter in the meantime, I’m in my early thirties and wanting to plan for more short term yet.

Still sizable expenses, such as purchasing a larger home, potentially starting a family, buying a new car some day, et cetera. So thank you so much for tuning into the podcast. It also said that they’ve been listening since 2020. So I appreciate you and hopefully you’re listening to this episode because I’m going to answer all of these questions right now.

So first, let’s talk about best practices for saving. So when it comes to savings, I highly recommend if you do not have an emergency fund yet to, um, go to a high yield savings account if you can, because those will give you a little more bang for your buck than a typical savings account you’ll find at a brick and mortar bank.

So a high yield savings account is exactly what it says high yield, which means that, um, they usually go above the average when it comes to your interest rate. So right now I have mine with Ally Bank and I’m getting about, I want to say it was like 4 percent or so, um, interest on the money that I put in.

Now, I also highly recommend an online bank because it prevents you from pulling out the money for non emergencies, um, which is why, which would defeat the whole purpose of having an emergency fund. Um, and so I like to keep mine out of sight, out of mind, so that way I don’t even have to think about it.

And if I do need the money, it takes a little bit of time to get to me. So I really have to think about that thing. So kind of self proof yourself. Okay. Um, and I highly recommend an online savings. So first, if you don’t have any savings whatsoever, then make sure you get to at least a thousand dollars, maybe a couple thousand, just so that if anything comes up, you’re able to cover it.

And then you can start working on, you know, your debt or whatever other goals that you have. So that way, if having three to six months is not priority for you right now, at least you have something of a cushion to help you versus using like a credit card or something like that, or overdrafting or getting into debt.

So, um, highly recommend that. Now let’s say for instance you have that little baby emergency fund already together and I’ll make sure I’ll link an episode I did on a baby emergency fund so you can dive deeper into that if you’re interested. Uh, but let’s say you have that already. So I recommend at least Three months or, um, of emergency savings, um, at least now, depending on what you do for work, depending on how stable your job is, um, also what you feel comfortable with.

Cause that’s another thing that people don’t think about. Like when they’re listening to this advice and stuff, they’re like, Well, six months will probably make me feel comfortable. Do what makes you feel comfortable. That’s my first tip. Okay. Make sure that you put enough savings that will make you feel comfortable.

Ignore all the noise about, Oh, your money’s not working for you. Oh, this, that, and the other, you know, blah, blah, blah. Look, we want to make sure that we’re comfortable. And so if six months does that for you, cool. three months does that for you? Cool. If a year does that for you? Cool. Just make sure that you are sticking to whatever goal you set for yourself.

So I usually recommend at least three months so that way you can weather, you know, if you lose your job, if something gets cut, if something happens, you know, that’s usually a good amount to have in order to weather those storms. Right. Um, and, Also think about, cause you may be listening to this when the job market might not be as good as it is right now.

Also think about what the job market looks like. If you were to lose your job today, how long do you think it would take you to find a new one? Is your position highly specialized? Is your, is there a demand for what you do? You know? Um, so also take that into consideration when you’re thinking about how much your, um, savings, your emergency savings should be.

Next question. You typically hear 10 to 20 percent of your income, but where should all of that go? So usually when you’re hearing people talk about oh, make sure you’re saving 10 to 20 percent of your income It could be a mix of things right? It could be that you know, it goes some goes to your savings some goes to investments Ideally they say and I’m doing air quotes 10 to 20 percent of your income should go to your Investment accounts.

So that could be like your retirement. Um, usually people are talking about your retirement when they say that, but it could be your retirement could be just a regular, um, investment account that you have. That’s not retirement based. Um, but the idea behind it is that you want to make sure that you have enough saved up.

And I know that you are. In your early thirties, as am I, but it’s super important for us to start thinking about the long term, because what you don’t want to happen is to wait too long and then you start investing and then you have to put in more and you actually still get less money at the end of the day, uh, because.

When it comes to investing time is of the essence, you know, um, so even if someone’s listening and you can only afford to put 20 in a month, or you can only afford to put 10 in a month, do it. It doesn’t matter how young you are. Um, I know I had started investing when I was like 19 in my retirement now.

Full disclosure, I did have to take it all out when I was in my twenties, but, you know, I started that early and it’s never too early to start. And if I still had all of my investments today, it would be worth a ton right now. So always keep that in mind. The more time that you have, the less you’ll have to put in on the.

on the outset and the more it has time to grow. So it only helps you if you start as early as possible. So also you ask if the emergency fund is fully funded, how much do you recommend goes to online savings 401k mutual funds and stocks, et cetera. So if your emergency fund is fully funded to whatever you want that to be, whether it’s, you know, The baby emergency fund, the three month, the six month, the 12 month, then I would recommend making sure that you are at least getting up to the match in your employer’s plan, if you have one, because if you don’t.

Then you’re leaving money on the table. And I actually tell people to do that regardless of where they are right now, even if you don’t have the baby emergency fund, still make sure you’re putting in up to the match because you don’t want to leave that extra money on the table. And honestly, it’s really hard to miss it.

Um, because it’s not really dollar for dollar out your paycheck since it lowers your tax bill. So just think about that. Now, if you already doing that, Then start upping that percentage. That would be my first thing. Um, whether it’s a Roth or a traditional start upping that position, um, percentage. Now, if you don’t, so let’s say, for instance, you’re in a traditional 401k and you don’t have a Roth option yet, I would recommend opening up a Roth IRA and start putting money into that.

Typically people will max those out, um, first because. The amount that you can put in every month is, I mean, every year, sorry, is really low. So, um, that’s one thing you can do as well. Now keep in mind that you need to make sure you are aware of how much you’re putting into both because it may, um, you know, make sure that you do your research on if you’re investing into both.

So that way your taxes don’t suffer. Okay. Thanks again. So. Just make sure you check it into that. Now, if you’re already doing the 401k, you’re already doing the Roth IRA. If you don’t have that as a 401k option, then you can start investing into just a regular brokerage account. You know, my philosophy is I want to have as many buckets as possible to pull from in retirement.

So I want to have a tax deferred, which would be like a traditional IRA or 401k, I want to have a tax free, which would be like the Roth 401k or IRA. And then I want to have a taxable account, which would be just a regular brokerage. So that way, when I get to retirement, I can pick and choose where I want to pull money depending on what my taxable income is for that year.

And I can get more into that, you know, what that looks like, what that strategy, um, kind of entails and another episode, but just start thinking about long term. Okay. Thanks So, I am also with those people that give you the advice to put as much as possible into retirement, because you never know when we get older, like, nobody wants to work for the rest of their life, okay?

You want to get out, you want to enjoy, and every time I talk to older people, um, their first thing that they say to me is that they wish they would have put more in, like, it You have to think about when you get to that point, you will not have any income. So you’re solely pulling from that pot of money.

As you can imagine, that can get really expensive really quickly. And then also you’re thinking about Not just your lifestyle, but your medical expenses. You know, you may have Medicare down the road, but other than that, you know, your medical expenses are going to fall on you. Everything for your upkeep is going to fall on you.

So that’s why you want to make sure that you have these things, um, set up and ready for you. Now, I will say if you have other goals, cause you do mention this as well, like purchasing a home, starting a family, buying a new car, make sure that when you’re setting your goals, first of all, they’re smart goals, but also work those into your budget too.

So if you do have those goals, And you’re trying to figure out if you should save up for those goals or save for retirement. I say save up for the goals because you do, like I said, still have time. However, just make sure that you are at least getting up to your match in your employer’s plan. That’s what I always recommend for people.

Make sure that you at least have a little bit in your savings and then start working on these. other goals that you have. And you can do a lot of these simultaneously. Um, it doesn’t have to be, uh, or it could be an end. Okay. So keep that in mind as well. So you can save up for a home while paying off your debt, or you can.

Save up for a new car while saving for a home. Like, you know, but just think about how those fit into your budget and how much money do you have to spread out? I will say it helps if you work on one goal at a time, because then you can put all your resources to that one goal. And then, um, you know, you can knock them out a little faster.

So those are just some tips to get you started. And hopefully I answered all of your questions. I tried to hit them all in one instead of spreading them out. But if you have any questions that you want me to answer right. here on the podcast, just go to www. moneytalkwithtea. com forward slash X Tiffany. I usually do not say any names unless you tell me it’s okay to say your name, but I will say, I see your questions and thank you so, so very much for listening to the podcast and tuning in for so long.

It’s greatly appreciated. And. I will make sure that I have all of those links in the show notes for you to submit your question and I also have an option where you can submit a voice. Memo as well, and I would love to hear your voices on the podcast and others too So, please feel free to use that option So, thank you so much for tuning in and I hope you have a wonderful rest of your day.

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