Saving For Your Future Part 2
Now last blog post I was talking about savings and 401K’s and IRA Roth’s, blah blah which may have gone in one ear and out the other. If I can I will try to simplify things.
So you have decided you want to save some money, whether it’s a small or large sum, it’s savings none the less and you should be proud and excited you want to make the next step.
What’s next is what to do with your money. Well hopefully you’ve had a checking or a savings account at a major bank, small bank, credit union or a brokerage. There’s lots of possibilities if you don’t have one, they’re extremely easy to set up.
I personally use my checking account for bills and everyday expenses, but I limit what I spend. I use a savings account to use as emergency savings in case I lose my job or am put out of work for awhile. I try to make sure I have 6 months worth of savings for rent, food, etc in my savings before I put cash anywhere else.
Now ideally you want to be able to pay yourself (which you should always do) and be able to pay bills at the same time. Now if you can and if your company offers it, put part of your money in a 401K.
A 401K is basically a savings account that your workplace offers you, where you can put your hard earned money (sometimes matched by your employer) before taxes are taken out. Your money will be taxed when it is taken out because it will be considered income at the time, but if left in long enough, your account will grow and build interest tax free (I.E. don’t have to pay capital gains on it). If your employer matches it, it’s basically increasing your savings rate. The biggest thing to take away from this is that you’re actively saving and that’s a good thing.
Look into whether or not your company has a 401K, sometimes companies won’t exactly tell you they have one, because it will cost them more money if they match. Don’t be scared to ask, it’s your future, so be proactive about it.