Setting personal financial goals early is important to your short-term and long-term financial health. People have different goals with their money, but you need to have an idea of what you want to do with yours so you don't wind up buried in debt or living paycheck to paycheck your entire life.
Rainy Day Fund
A common first goal for couples is saving several months' worth of income in a rainy day or emergency savings fund. When you live on a tight budget, this gives you a cushion for unexpected expenses. Car repairs, home repairs and medical bills are among the more common types of unforeseen expenses. Having a savings account helps you cover these unplanned events without having to turn to your credit card.
It's important to separate your financial assets if you want to make sure you use money for its intended purposes. Aside from an emergency fund, you should also consider a savings account that sets aside money for vacations or other recreational activities. Again, planning ahead when you want to have a vacation helps you avoid overusing your credit card and paying more in interest in the long run.
People invest money for a variety of reasons. One common goal is to generate investment income. While you tuck away some money in savings, you can also try to find some extra cash to invest in stocks, bonds or other income and growth investments. Some stocks pay dividends regularly, but you can also buy and hold stocks until they appreciate in value. Bonds have less risk for loss than stocks and can earn you 4 to 5 percent interest.
Long-Term or Retirement Savings
Young people sometimes focus more on short-term financial goals because long-term retirement planning seems too distant to worry about. Start your retirement savings and investments early to give yourself a much better quality of life when you get older. You may have a 401k or other retirement account through work. You can often set up additional tax-free retirement accounts through a bank or financial services company. Investing directly in stocks and other long-term investments is another option.
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