If we were all privy to a limitless amount of money, we wouldn't need to make tough decisions that sometimes make life less pleasant. But since money does not, in fact, grow on trees, we all need to be judicious about how we spend it. And often, that involves setting priorities so we know how to best allocated our limited resources.
If you're curious whether your savings priorities align with those of your peers, insurance company Vantis Life did a little digging to find out. Here are the top three financial priorities it identified among Americans today.
1. Saving for retirement
It's encouraging to see retirement savings top Americans' list of money-related goals. The reality is that Social Security won't provide enough income to sustain the typical retiree by itself. Those benefits only replace about 40% of the average earner's pre-retirement wages, and most seniors need roughly twice that amount to live comfortably. Throw in the fact that a future reduction in benefits is certainly on the table thanks to Social Security's impending financial shortfall, and it's clear that personal savings are a must.
If you've yet to make much progress in this regard, start cutting some expenses in your budget to free up money to put into an IRA or 401(k). Both accounts offer tax advantages that make it easier and more affordable to save for the future. Currently, IRAs max out at $6,000 a year for workers under 50, and $7,000 for those 50 and older. The limits for 401(k)s, meanwhile, are $19,000 and $25,000, respectively, and they're increasing in 2020.
But don't be intimidated by these figures. If you can't max out an IRA or 401(k), do the best you can. Socking away $250 a month over a 30-year period will give you a $283,000 nest egg if you invest your savings at an average annual 7% return, which is more than doable if you load up on stocks in your portfolio.
2. Saving for emergencies
Without an emergency fund, you may have no choice but to resort to debt the next time a major unplanned bill lands in your lap. The result? Wasted money on interest, and potential damage to your credit score.
The fact that Americans' second-highest priority is building emergency savings is a good thing, so if you need to boost your personal cash reserves, start cutting back on spending to eke out as much money from your paycheck as you can month after month. Getting a side job on top of your main one is a good idea, too, since you'll have the option to stick all of your earnings from it (minus taxes) into the bank. You can also try selling some unwanted belongings of yours for cash, which is worth doing if you're looking at no money in savings at present.
Travel may not be as necessary a goal as building retirement and emergency savings, but there's a benefit to exploring new places. Not only can different experiences help you broaden your horizons and grow intellectually, but they can also help you approach the work you do from a more refreshed, recharged standpoint. Of course, saving for your golden years and building an emergency fund should certainly take precedence over setting funds aside to visit different corners of the earth. But if you're on track in both regards, then there's certainly nothing wrong with saving to see the sights you've always dreamed of.
Maybe your financial priorities differ from those of Americans on a whole. Or maybe not. Either way, if you get into the habit of saving money consistently, you'll be more likely to meet your personal goals.
It helps to not only follow a budget to keep your spending in check, but also, to automate your savings so you're not tempted to stray. That could mean setting up an automatic transfer from your checking account to a savings account, or signing up to have a portion of your paycheck moved directly into your IRA or 401(k). You can even set up separate savings accounts for different objectives like taking a trip or buying a house so that you know you'll have money coming in on autopilot.