Personal Finance Primer
How much money do you keep in your savings account? What about your checking account? Is it too much, or not enough to cover your expenses? And what about your retirement funds, like your 401(k)? Have you contributed enough, or do you need to increase or decrease the percentage coming out of your paycheck?
There are so many questions that come with maintaining your financial portfolio. Even if you try to keep things simple and don't invest much into the market, there are things you should be aware of to ensure that you're making the most of what you have. Here are some of the most common questions we see, and the best answers we've found to help you balance your money appropriately.How much money should I keep in my savings account?
If you aren't saving for anything big that you have a specific target for—like a down payment for a house or a car—then it can be hard to know how much you should keep in your savings account. If you don't already have an emergency fund, this is a great place for you to keep a set amount of cash on hand should the unexpected arise. Experts differ on exactly how much you should save for your emergency fund, but it should be enough to cover all of your necessary expenses for at least 3 months. If you are the primary breadwinner in your family, or if you have a somewhat specialized job, it is recommended that you try to save enough to cover you for 6-8 months, as it can take a while to find a new position should you suddenly lose yours. The more you can save, the less you have to worry about. But aiming for 6 months worth of expenses is a good target to hit. So if you spend about $4,000 a month to cover your rent/mortgage, utilities, and extras, you'll want to try to save between $12,000 (for 3 months) and $24,000 (for 6 months). And if saving more makes you feel more secure, then find the amount that makes the most sense to you and keep that in your savings account.How much money should i keep in my checking account?
Checking accounts aren't like savings accounts—they usually have much lower, if any, interest rate and annual percentage yield that will help you build more savings. Savings account typically have interest rates higher than checking accounts, and that is a better place to keep your money. For your checking account, most experts agree that keeping just enough to cover your monthly expenses—plus a small buffer—is a good target to hit. If you keep too much money in your checking account, you're losing on potential interest that money could be making in your savings account.How much should I contribute to my 401(k)?
If you have a 401(k) plan through your company, you have a great opportunity to save money for your retirement. If you haven't enrolled in it already, do that now. The earlier you can start saving, the more interest you'll accrue, and the more money you'll have for retirement.
The first thing you want to do with your 401(k) is find out if your company offers a matching contributions program, and if so, how much they'll match. At the bare minimum, you'll want to contribute as much as your company will match, because that's free money right there! And who doesn't like free money? If you are financially able, consider increasing your contributions to the annual limit. People under the age of 50 can contribute up to $18,000 a year to their 401(k), and if you're over 50, you have an opportunity to catch-up and contribute up to $24,000.How can I make the most of my money?
There are several ways that you can increase your savings each year. If you have more money than you need for your emergency fund in your savings account, consider moving some of it to a higher-yielding account like a Dime Money Market Account.You'll still have access to your money, but it's going to earn more over time. You can also consider a Dime CD, which can also earn you higher returns depending on how much you put into it and how long the terms are. Consider also opening an IRA, or Individual Retirement Account, to help increase your savings for the future. There are lots of ways you can help build your finances and make the most of your money.
If you are interested in learning more about these services, call us today at 1-800-321-DIME (3463) and speak with a member of our team to get you started on the path to financial success.