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A wholly-owned subsidiary of PulteGroup since 1972, the third-largest homebuilder in America, Pulte Mortgage gives customers a financing option that differs from those of banks and online lenders. As an imprint of the larger conglomerate, Pulte Mortgage leverages construction experience and a personal touch to take borrowers through the home purchase process, helping them understand […]
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A key financial decision people struggle to make is how to allocate savings for multiple financial goals. Do you save for several goals at the same time or fund them one-by-one in a series of steps? Basically, there are two ways to approach financial goal-setting:
Concurrently: Saving for two or more financial goals at the same time.
Sequentially: Saving for one financial goal at a time in a series of steps.
Each method has its pros and cons. Here’s how to decide which method is best for you.
You can focus intensely on one goal at a time and feel a sense of completion when each goal is achieved. It’s also simpler to set up and manage single-goal savings than plans for multiple goals. You only need to set up and manage one account.
Compound interest is not retroactive. If it takes up to a decade to get around to long-term savings goals (e.g., funding a retirement savings plan), that’s time that interest is not earned.
Compound interest is not delayed on savings for goals that come later in life. The earlier money is set aside, the longer it can grow. Based on the Rule of 72, you can double a sum of money in nine years with an 8 percent average return. The earliest years of savings toward long-term goals are the most powerful ones.
Funding multiple financial goals is more complex than single-tasking. Income needs to be earmarked separately for each goal and often placed in different accounts. In addition, it will probably take longer to complete any one goal because savings is being placed in multiple locations.
Working with Wise Bread to recruit respondents, I conducted a study of financial goal-setting decisions with four colleagues that was recently published in the Journal of Personal Finance. The target audience was young adults with 69 percent of the sample under age 45. Four key financial decisions were explored: financial goals, homeownership, retirement planning, and student loans.
Results indicated that many respondents were sequencing financial priorities, instead of funding them simultaneously, and delaying homeownership and retirement savings. Three-word phrases like “once I have…,", “after I [action],” and “as soon as…,” were noted frequently, indicating a hesitancy to fund certain financial goals until achieving others.
The top three financial goals reported by 1,538 respondents were saving for something, buying something, and reducing debt. About a third (32 percent) of the sample had outstanding student loan balances at the time of data collection and student loan debt had a major impact on respondents’ financial decisions. About three-quarters of the sample said loan debt affected both housing choices and retirement savings.
Based on the findings from the study mentioned above, here are five ways to make better financial decisions.
Rethink the practice of completing financial goals one at a time. Concurrent goal-setting will maximize the awesome power of compound interest and prevent the frequently-reported survey result of having the completion date for one goal determine the start date to save for others.
Do more of anything positive that you’re already doing to better your personal finances. For example, if you’re saving 3 percent of your income in a SEP-IRA (if self-employed) or 401(k) or 403(b) employer retirement savings plan, decide to increase savings to 4 percent or 5 percent.
Decide to stop (or at least reduce) costly actions that are counterproductive to building financial security. Everyone has their own culprits. Key criteria for consideration are potential cost savings, health impacts, and personal enjoyment.
Almost 40 percent of the respondents were saving nothing for retirement, which is sobering. The actions that people take (or do not take) today affect their future selves. Any savings is better than no savings and even modest amounts like $100 a month add up over time.
Use an online calculator to set financial goals and make plans to achieve them. Planning increases people’s sense of control over their finances and motivation to save. Useful tools are available from FINRA and Practical Money Skills.
What’s the best way to save money for financial goals? It depends. In the end, the most important thing is that you’re taking positive action. Weigh the pros and cons of concurrent and sequential goal-setting strategies and personal preferences, and follow a regular savings strategy that works for you. Every small step matters!
Homie donates $15,000 to the Girl Scouts Pine Council to foster creativity and entrepreneurial skills. Click here to find out how weâre helping turn a cookie castle dream into a reality.
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Life happens, but you can be prepared for the unexpected with an emergency savings fund. These funds are designed to be set aside for unanticipated expenses, such as: Unexpected job loss Unforeseen medical expenses Car repair Family emergencies Emergency funds…
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Today, I have a fun interview to share with you that will show you how to become a freelancer. I recently had the chance to interview Ben Taylor. Ben has been freelancing since 2004, and he has worked for dozens of companies. Yes, this is a career path that you can learn! As Ben will […]
The post How To Become a Freelancer and Make a Full-Time Income appeared first on Making Sense Of Cents.
Things seem to have a way of breaking down at the worst times. Here’s how you can make sure you’re prepared for the worst.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
UPDATE: Some offers mentioned below have expired and/or are no longer available on our site. You can view the current offers from our partners in our credit card marketplace. DISCLOSURE: Cards from our partners are mentioned here. The Apple credit card launches this summer, and it pairs the high-tech, app-based culture of the brand with… Read More
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When it comes to excuses consumers give for their poor credit scores, banks and lenders have heard it all. Maybe you lost your job and couldnât pay your student loan payment for a few months. Or perhaps you thought youâd gotten a deferment but were too busy job hunting to find out for sure. Maybe you […]
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Spouse Has Bad Credit? How It Affects You It wasnât until a few months after my husband and I got married that I decided to check both our credit scores. While my husbandâs credit score wasnât horrible, it certainly didnât…
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As many states move to reopen businesses affected during COVID-19, itâs essential that building owners, managers and tenants follow safety guidelines to keep employees andâ¦
The post Getting Back to Work Safely first appeared on Century 21®.
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