Bottom Line Up Front
- Determine how much you can put toward savings each month.
- Rank and prioritize your non-retirement savings goals. An emergency fund should be the first priority.
- Make it automatic—set up payments to your savings account just like you pay your bills each month.
Saving for retirement is a big goal—but it’s not the only goal in your financial life. You may have your heart set on buying a home or car, starting a business, taking a dream vacation or funding a child’s education. Ideally, you’d like to save for those life events without losing sight of your retirement savings goals. So how do you do that?
Plan Your Savings Strategy
The first thing you should do when planning your savings strategy is to find out if your employer offers a retirement savings match. If they do, allocate as much of your budget as needed to take full advantage of that option, if you’re able. That’s extra money in your pocket!
From there, with any savings plan, you have to decide how much you can spare each month after your basic necessities are met. Take a look at your budget, see if there are any areas where you could cut back, and determine an amount to set aside for savings. Next, take a look at what goals you might have coming up, in addition to retirement. Navy Federal’s Savings Goal Calculator can help you decide on a realistic savings budget.
Once you figure out your savings budget, follow these tips to help you save for your retirement while also managing your short-term goals.
- Build an emergency fund first. Having emergency savings to cover a large unforeseen expense should be your top priority. Make a goal to save a few months’ worth of expenses for emergencies so you don’t need to resort to credit cards or raid your retirement savings in a pinch. Learn more about how and why to build an emergency fund.
- Rank your savings goals. Are you planning a wedding or house hunting in the next year or two? You’ll want to decide which savings goals are top priorities and consider the timeframe for each goal. The key is to continue saving for retirement in the background while focusing on smaller goals.
For example, let's say you have $600 per month in your budget for savings. You don’t have an emergency fund yet, and you're saving for a new car within the next 2 years. How do you decide what goes toward retirement and what goes toward other goals? One way to split is to allocate 50% toward retirement and 50% toward your other goals. If you do that, here's what your savings budget may look like:
- Retirement Savings (50%): $300 per month
- Emergency Savings (25%): $150 per month
- Car Fund (25%): $150 per month
- Make it automatic. Keep making progress toward your goals by making saving automatic. Set up recurring transfers to go toward each of your savings or investment accounts. Let’s say your goal is to save $20,000 for down payment on a home in the next 2 years. You’ll reach your goal before you know it if you set up biweekly transfers of $400 into your savings account. Setting up recurring transfers into your savings account is a smart, convenient way to make sure saving money happens automatically just like any other monthly expense.
Make sure not to stretch yourself too thin when starting a new savings plan. Pick 1 to 2 top goals first and start there, then add in others as you get into a rhythm.
What Are Your Savings Goals?
The sky’s the limit when you have a solid plan to reach your goals. With Navy Federal, you can make it happen by finding the right balance of saving for retirement and hitting the financial goals that matter most to you. Check out savings accounts and tools to help guide you.