Where should I start saving?

Sometimes getting started is the hardest part. When you’re young, retirement can feel so far away while you have other, more timely goals that you want to focus on, like buying a house or taking a trip. So, it can be daunting to figure out where you should start when it comes to saving. To help, I made this handy “Savings Hierarchy.”

1. Contribute to your employer plan, like a 401k, up to the company match (if you have one). 

Most employers offer some kind of match if you contribute to your 401k. It may not seem like a lot, but your contribution coupled with your employer match can have an enormous impact on your retirement. Some people call this “free money,” but it’s actually part of your compensation and you deserve that money!

2. Start an emergency fund. 

Look, I know this is a boring step. It’s the one everyone wants to skip, but it’s too important to ignore. Depending on your situation, you should be aiming for somewhere between 3- and 6-months’ worth of expenses. When I say expenses in this situation, I mean essential expenses such as rent, groceries, utilities, etc. You probably won’t be going out to fancy dinners at the same rate if you’re unemployed. 

For some, 3–6 months may feel overwhelming. In that situation, I’d encourage you to start with a smaller goal, such as $1,000. That’s a great first benchmark! Then bump it up to $2,500. Slowly increase the goal until you’re in a comfortable spot. 

3. Pay off any high interest (10%+) debt.

Think credit card debt here. I can’t tell you how many times I’ve seen folks skip step number two, work really hard to pay off their credit card debt, and then had something unexpected happen. Because they don’t have an adequate emergency fund, they end up putting that unexpected expense on their credit cards, negating all the hard work they’ve already done. 

It’s really important to get your high interest debt paid off, but we want to make sure we’ve checked the appropriate boxes first. 

4. Save for your other savings goals.

This goal is intentionally vague. Whatever you prioritize as an important goal should go in this category. That may mean several goals, like buying a home, paying off lower interest debt (like student loans), or, my favorite, taking that trip you’ve always wanted to cross off your bucket list! 

It can be challenging to stick to a plan like this or to prioritize your goals. That’s where a financial planner comes in! A good financial planner can help you navigate the nuances of your individual situation or act as an accountability partner who celebrates with you as you move your way down this list.