3 weeks – Immediate funds:
You want to plan out your funds for the next 3 weeks. You have bills coming up, credit card payments. Take time to schedule them in advance so you do not endure any finance charges for missed or late payments. Check often because the more credit cards and bills you have the more due dates and chances of fouling up your credit score there are. Most people get a pay check at least every two to three weeks. Calculate just the right amount of money to keep in your checking account and put the rest into a savings account or MMA.
3 months – Emergency funds:
If you were to lose your job today would you be ok? Are you living paycheck to pay check? You should be thinking about protecting your income. You should have your monthly bills and spending for 3 months in a liquid savings/mma account. You should have something like this if you were to lose your job and need money for any emergencies that come up. Often at our age we have car repairs or something that comes up that we cannot account for. So it’s important to have enough money saved up for this type of situation as well. The typical amount to have in this fund is your monthly bills x 3. This way you will have 3 months of bills you can pay off if something were to happen like loss of job or unexpected payments.
3 years – Mid-term goal funds:
Typical for young professionals is to have short-term to mid-term goals. My goal is to buy a house in the next few of years. This could also be money for a new car, boat, or wedding; whatever you want to buy with your savings in a large chunk. This fund should also be in a liquid savings/MMA. It is not worth the risk putting this money into the market for a slightly higher return. Figure out how much you want to have in this account 3 years out then realistically put what you can each month to reach this goal.
30 years – Retirement funds:
It’s never too early to think about your retirement fund. It will benefit you in the long term by starting early. Most companies have a 401k retirement plan which they encourage you to participate in by offering a match. When you contribute a percentage of your salary pre-tax to your 401k your company will match your contribution up to a predetermined percent. My company’s 401k plan is a 50% match if I put in 6% of my income. It’s a good idea to put in up to your company’s match if possible. They are giving you FREE money! I am putting in 6% of my income, and my company puts in 3% each contribution. If you can’t afford to put in up to what your company matches try to put in even 1%. Your company will still make a contribution towards your retirement.
A Roth IRA is also a good thing to start for your retirement. You may contribute up to 5000 dollars a year to this account -after taxes. Contributions to this account are made with after taxed income and the money will grow tax-free. You will be able to take out this money at 65 1/5 without paying taxes on it. Unlike a 401k were you will pay taxes when you cash out.
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