Boneparth recommends doing this for 3-6 months. This allows you to account for seasonal changes, holidays, and other anomalies. And while he loves a good spreadsheet, he says you can do this any way you like. Download the budget app, go through his banking records digitally, or pen on paper to find out what works best for you.
At the end of steps 1 and 2, Boneparth says you need to be very clear about: what you’re saving for, how much it will cost, and how long you’ll need to save. Combining these factors is key to creating a plan that works for you, he says.
3. Where are you with your savings?
Let’s say you’ve completed the first two steps and feel good. “Hold your phone,” says Vaughan Peirce. Have you paid off your debt? Are you on your bills? Are you paying off your credit card in full each month? If not, you should focus on handling those necessary expenses before investing in anything new, he says, Boneparth. If so, please continue.
Next question: Do you have a cash reserve you can rely on in case of an emergency? Make sure you have it available in case something happens or you need it for something unplanned, says Jen Imbort, a certified financial planner.Boston Area Vice President and Financial Consultant Fidelity Investments center. (If you don’t know what your monthly expenses are, completing step 2 should give you a clear idea, he says.) If you don’t have an emergency fund yet Focus on saving for it first. If so, read on.
Has your employer offered matching contributions to your 401(k) and are you taking full advantage of them? says Mr. If so, go to step 4.
4. How much time do you have?
Now it’s time to pull out the list of goals you created in step 1. Are any of these goals within the next four years? No. You need to rob cash and do stats.
Suppose you want to pay the down payment on a house within two years. If you invest that money, you can lose it and you don’t have much time to make up for your losses. You should either delay your goals or spend less money on them than you expected.
Instead of taking risks, you should focus on saving for the financial goals you want to achieve in the next four years, says Boneparth. For example, if you need $100,000 over 4 years, you should save $25,000 per year ($100,000/4 years) or $2,084/month ($25,000/12 months).