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Once you have your financial confidence account (aka an emergency fund for those unplanned expenses) secured, you deserve a pat on the back and a moment to savor meeting this major financial milestone. But remember: The account is the foundation of your financial house, not the roof. It’s not the end of a financial savings plan … it’s the beginning.

And once you’ve met your goal of building up three months of living expenses (the amount needed for bills and necessities) in your FCA, you can start saving for more specific expenses. Do you want to own a home, or travel the world? That’s great! But don’t forget about saving for the not-so-fun expenses as well, like regular maintenance for your car.

Save for big (values-based) goals

The temptation to tap into your financial confidence account for random purchases (or wants) can easily crop up. To avoid that, open a targeted savings account(s) to pay for big-ticket, values-based items (think: new car, home down payment, wedding). Targeted savings funds allow you to save up and pay for pricey items while keeping your financial confidence account intact for true emergencies—that’s a win-win!

Challenge: Regardless of how you save and what you save for, just make sure you save first: Try allocating at least 10 to 15 percent of your income for long-term savings goals.

Tip: One of those savings goals should certainly be retirement. If you aren’t already saving for your retirement, start today. If your employer offers a 401(k), be sure to take advantage. And if you’re already contributing to a 401(k) and want to save more, there are other ways that you can save for retirement, like opening an IRA (traditional or Roth).

Save for the expected

You’ve probably heard “plan and save for the unexpected.” And while that is certainly important, it’s just as crucial to save for the expected. Why? Because when you know certain expenses are coming, like a new set of tires or a new roof for your house, you should be saving for those items—they aren’t “emergencies.”

That’s why opening one or several accounts separate from your core financial confidence account (which is only for those unanticipated costs) is a good strategy. Each account can be earmarked for different items, and you can funnel money in automatically. You’ll feel more financially secure knowing your savings strategy is in a good place.

 

3 key takeaways
  1. Your financial confidence account is the foundation of your financial house, not the roof. It’s only the beginning of your financial plan.
  2. Set up separate savings accounts for big-ticket items.
  3. Targeted savings funds allow you to pay for items you need, as well as keep your financial confidence account intact.
This content is educational in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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