A brand new year is here — what are you looking forward to most? Maybe you're excited to finally tackle that home renovation project, upgrade your vehicle or launch a side business. Or, maybe you're planning to take a special vacation when it's safe to do so.
To make your financial dreams and goals a reality, it's important to have a savings plan that accounts for expected and unexpected expenses.
One helpful strategy is to separate your savings into three categories based on when you plan to use the funds: Now, Soon or Later. Here's how it works:
Saving for Now
“Now" savings help cover immediate changes to your income, such as shortfalls or sudden spikes in your expenses. You might need to use this fund in the event of job loss, unexpected medical costs, home or vehicle repairs or another emergency expense.
Your “Now" savings are designed to help you weather these financial storms without derailing your goals. Ideally, you should try to save enough to cover up to three months of essential living expenses in case of an emergency or life change. Keep these funds in an account you can access easily if you need them, like a Wright-Patt Credit Union (WPCU) TrueSaver® savings account or Money Market Account.
Saving for Soon
Your “Soon" savings are for short to mid-term expected goals and expenses — the spending you know is coming in the next few months. These funds are set aside for things like taxes, home repairs, vehicle maintenance and debt reduction goals. Your “Soon" savings should also account for fun spending such as new clothing, gifts, subscriptions and vacations.
When setting your “Soon" savings goals for 2021, consider your needs and wants for the near future. Write your financial goals down and keep them nearby as a reminder. You can always revisit and refine your short to mid-term goals every few months.
Next, it's helpful to set up secondary share accounts for each of your goals to keep the funds separated. Use WPCU's Mobile and Online Banking to set up small automated transfers on your paydays or on a weekly or monthly basis. You'll be on your way to reaching your goals in no time!
Saving for Later
Finally, it's important to save for your long-term goals — those big-picture dreams that you want to achieve one day. These milestones may take years to reach, but saving early and often can make all the difference.
Here's what you might include in your “Later" savings category:
Set a target date for each of your long-term goals and work backward to estimate how much you should be saving each month to reach them. WPCU has a variety of financial calculators to help you estimate what it will take to reach big goals like saving for retirement and paying off debt.
Ready to Save Better in the new year? Get started with WPCU's helpful tools and resources, including interactive learning modules on topics ranging from financial foundations to preparing for retirement.