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Bottom Line Up Front

  • You can focus on everyday expenses today, save for tomorrow and invest for your future at the same time. 
  • Before you start saving or investing, build a healthy balance in your checking account and check out your options for 401(k) matching through your employer.  
  • Your first priority for savings should be your emergency fund. With day-to-day expenses and short-term savings in hand, you can look at long-term savings goals and investment options.

Time to Read

6 minutes

March 7, 2022

The list of things you should be doing with your money can seem endless—and a little tricky to balance. You may have short-term and long-term goals for your savings, but you also need to pay the bills this month. Plus, you’ve probably heard or read that you should be saving more for retirement to protect your financial future. You might be wondering what you should be doing with your money, and maybe you're asking if it’s possible to do it all.

Let’s look at how budgeting for today remains a top priority, while you also learn to save for tomorrow and your future financial goals.

So, How Can You Support “Everyday” Financial Goals?

Before you start saving or investing, you need to maintain a healthy balance in your checking account. With enough money on hand, you can avoid relying on credit for purchases. If you can pay off your credit card statement balance each month, then you’re in a position to start using your credit card responsibly for the occasional purchase. It's nice to have that option.

These concepts are just some of the basics of day-to-day financial planning. With these covered, you can begin to build your savings and start to invest for retirement. The good news is, you don’t have to choose between saving money for a rainy day or building wealth. You can do both.

Saving and investing share similarities, but they aren’t dependent on each other. The choice of how and when to do both is yours.

Saving

Most financial professionals will recommend that you set aside at least 3 to 6 months of pay in a savings account that’s reserved for emergencies only. This can help you cover unexpected expenses—without having to use high-interest credit. But you can start small and work your way up; try starting with $1,000 in savings and work your way up to 3 to 6 months. 

You can choose to build emergency savings in several ways. One option is a regular savings account, but you can also choose a money market account. A money market account is a type of high-yield savings account that accumulates dividends when you have at least $2,500 in the account, and they’re designed to facilitate savings. Another option is to ladder certificates of deposits so your money grows and matures at different times.

Once you’ve built your emergency fund, the next step is up to you. Be realistic about your goals. You don’t want to save too aggressively and break your budget. It’s about saving what you can.

Investing

If the word “investing” sounds to you like things could get complicated, you’re not alone. But, whatever your risk tolerance is, remember that investing is the key to saving for retirement and building long-term wealth. And the truth is, investment options have never been more accessible than they are today.

“We turn on the news and hear about the markets. They’re up or they’re down. Investors are buying and selling. As consumers, we don’t know what to make of it,” said Mathu Mathu, assistant vice president of operations at Navy Federal Investment Services.

Investing is also a great way to protect your assets against inflation—another hot topic in the news these days. Your money loses purchasing power during inflation. But you can put it to work in the stock market. You can even look at putting it in an asset class like real estate. A financial advisor can talk you through the options as you look at stocks and other types of investments.

The Slow But Steady Stock Market

Despite fluctuations and volatility in the stock market, the numbers tell a story of steady performance over time: Between 1991 and 2020, the stock market has averaged a 9.87 percent annual return, or 8.44 percent annualized return.  At the same time, understand that investing involves risk with the potential loss of principal.

If you’re looking to build wealth over the long term, a low-cost brokerage account could be a great tool for you. Or, make an appointment with a financial advisor to discuss your options. 

How Does A Brokerage Account Work?

In simple terms, to open a brokerage account, you’ll deposit a certain amount of money at a firm, asking it to make trades on the stock market. You can work with the firm to determine your investing strategy. It may include exchange-traded funds (ETFs), stocks, bonds or stock options, but any earnings will belong to you. And, only you can determine the mix of high-risk and low-risk investments that give you the chance to grow your principal. 

Firms that offer more hands-on investment advice and services, known as full-service brokerages, often charge more in fees and commission, while discount brokerages provide similar services with less direction, leaving the strategy more in your hands.  For instance, the Navy Federal Investment Services Digital Investor is an easy, low-cost, online platform that caters to the do-it-yourself investor. 

Once you decide to open a brokerage account, time is your ally. The more time you give your money to grow, the greater the chances are for you to reap the benefits of compounding. You’ll want to get started today so your principal investment can grow with your portfolio. Be patient and steadfast; growth won’t happen overnight. And, keep in mind that a brokerage account is likely part of a bigger retirement savings portfolio. It may include other income sources, from retirement accounts like a 401(k) or IRA to Social Security, a pension or annuity.

Putting It All Together

Remember—your personal finances aren’t black and white. You can focus on today, save for tomorrow and invest for your future at the same time. It might take some budgeting, but it’s possible!

A pay raise or promotion can be a great time to start, or if you can find some wiggle room in your budget, or have a little extra leftover after you’ve paid off a debt. Consider dividing the extra cash between saving, investing and another line item. That could be even more debt reduction or just some good ol’ fashioned dining out.

Choosing to tackle your everyday expenses while saving for a rainy day and investing shouldn’t be stressful. In fact, it can bring you peace of mind knowing you’re prepared for today and your future.

Key Takeaways Key Takeaways

Disclosures

Navy Federal Financial Group, LLC (NFFG) is a licensed insurance agency. Non-deposit investments, brokerage, and advisory products are only sold through Navy Federal Investment Services, LLC (NFIS), a member of FINRA/SIPC and an SEC registered investment advisory firm. NFBS is a wholly owned subsidiary of NFFG. Insurance products are offered through NFFG and NFIS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Deposit products and related services are provided by NFCU. Digital Investor offered through NFIS. Financial Advisors are employees of NFFG, and they are employees and registered representatives of NFIS. NFIS and NFFG are affiliated companies under the common control of NFCU. Call 1-877-221-8108 for further information.

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.