Create a Savings Plan That Supports Your Dreams and Goals

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You can Live Richly℠ now and in the future by making smarter financial decisions. To make better decisions, you must have complete information about your financial situation and face the truth. Your financial truth. Don’t sugar coat it, but also don’t be hard on yourself or make it worse than it really is. Sit with a financial professional who can look at your situation rationally, logically, and unemotionally. With honest analysis and deliberate action, you could have the best possible outcomes!

People often ask, “How much should I allocate toward savings?” The answer is “it depends.” It depends on your age, how much you already have saved, the amount of risk you choose to take at different stages of life, when you wish to buy a home, make other large purchases, or retire, and how much you want to spend during retirement. Luckily, there are wealth advisors out there, like us here at United Capital Financial Advisors, who can help you create a plan based on your specific needs and desires. To get you started, until you make the time to meet with a licensed advisor, here is a basic answer.

Think of your savings as three separate buckets.

  • Emergency Savings: Bucket number one is your emergency savings, which should be a liquid, easily accessible account with 2-6 months’ worth of expenses available. Look at your budget spreadsheet to determine how much you spend each month and multiply that amount by the number of months you feel you would need to supplement your income in the event of a job loss or other unforeseen event.
  • Dream Savings: The second bucket is your dream savings, which may or may not need to be liquid depending on when you plan to use the funds. This money could be earmarked for travel, a boat, a home, a vacation property, or whatever you desire. You must enjoy life!
  • Retirement Savings: Bucket number three is your retirement savings, which you should begin as soon as you join the workforce. It is all about time IN the market, not timing the market. The longer you are saving and/or investing your money, the more likely you will generate a decent average return that could facilitate a comfortable retirement. There are employer-sponsored retirement plans as well as individual retirement accounts available at most financial institutions if your employer does not offer a plan. To find out what type of plan is best for you, please consult with a licensed advisor.

Until you meet with your advisor and set specific goals for your financial situation, you may wish to use the 5/5/10 plan. Put 5% toward emergency savings, 5% toward your dream savings, and 10% toward your retirement savings, at a minimum. Once your emergency savings bucket has filled up to a comfortable level, you may then allocate that percentage toward your retirement savings. This is similar to the savings plan Fidelity suggested in their March 2019 article,.

Then be sure to automate your savings. David Bach, author of “The Automatic Millionaire,” suggests you “Pay yourself first. Automatically.” noting “That little decision can change the course of your life.” When you pay yourself first, before your discretionary expenses, your chances of success multiply tremendously!

References and further reading:

Bach, D. (205). The Automatic Millionaire

Fidelity Viewpoints. (2019). 50/15/5: a saving and spending rule of thumb from

This commentary contained herein is intended for informational purposes only and should not be construed as tax, legal or investment advice. Past performance is not indicative of future results. Clients should obtain their own tax, legal or investment advice based on their circumstances. The material is based on sources deemed reliable but is not guaranteed.

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