Unless you’ve been hiding under a rock devoid of wi-fi signal, you’ve probably seen and/or listened to (and then hit repeat on) Queen Bey’s unapologetic anthem proclaiming how she slay…”Formation.” If not, don’t worry. We found a totally safe-for-work version here.
Now, I’m not here to talk about how Beyoncé and I are twinsies because of our mutual love for Cheddar Bay Biscuits or how I’ve been missing out by NOT having hot sauce in my purse…I mean, I don’t have an excuse, have you seen the tiny Tabasco sauce bottles that come in every MRE?
I am here to tell you that I guarantee that right after Beyoncé slays, she sure as hell pays herself first (and then she goes out to buy that “Givenchy dress” and “Roc necklaces”…obvi).
This week show us how you slay by taking at least one step toward paying yourself first as part of NextGen MilSpouse’s You Got This: 52 Challenges to Make 2016 Your Bitch.
Week 8 Challenge: Pay Yourself First by Setting Up Automatic Deposits to Your Savings and Investing Accounts
Challenge Details: Do you have an emergency savings account? An IRA? A 401(k)? TSP? Set aside 1 hour this week to set up an automatic deposit from your bank account or paycheck to put toward your savings and investing goals.
Your Deadline: February 29
Bonus points if you post a photo of you telling us how you played this goal on Instagram or Twitter with the hashtag #2016IsMyBitch
Because you’re awesome and you already completed the Week 2 Challenge and the Week 3 Challenge, you should have a pretty good idea of how much money you have to play with when it comes to paying yourself first
But first, what the heck does it mean to pay yourself first?! Good question.
Paying yourself first is just the most overused way ever to say,
Hey, before you spend all of your money, why don’t you set aside some money for an emergency or when you decide you’re too old for this shit (this shit=working full-time).
I know, it’s SO hard to save for things because life is SO expensive and you hardly have money to…
hold on, let me set down this grande nonfat smoked butterscotch latte…
make it through each month, but seriously…Rome wasn’t built in a day and neither will all of your savings goals.
That’s OK, we get it. Baby steps are still steps forward. Here’s a quick priority list of all of the things you should consider setting up for automatic deposits.
How to Prioritize Your Savings and Investing Goals
Priority 1: Emergency Savings
Emergency savings is like the foundation of paying yourself first. Everybody needs to be working toward having at least 6 months of living expenses (not necessarily salary) set aside in a savings account. Remember, emergency savings are supposed to be liquid assets, meaning that, in the event that you need the funds you can get to the funds quickly.
There are 2 easy ways to set this up: 1) via allotment from an LES or paycheck 2) via an automatic transfer from your main checking account.
If you’re someone who likes to shuffle money between your savings and checking accounts, you may want to consider having a savings account at a different bank than your checking account. You know who you are.
Priority 2: Retirement Savings
Because retirement savings are a bit of a long game, the sooner you get started, the better. Here are a few examples of the types of retirement savings accounts you might have: Thrift Savings Plan, 401(k), 403(b), Roth or Traditional IRA.
A lot of times, we think of retirement savings as a benefit associated with being actively employed, but did you know that there are spousal IRAs for spouses who work limited hours or stay at home? Check out the IRS guide on spousal IRAs here.
For employer sponsored retirement savings, oh like TSP, you should be able to designate a portion of your salary to be deposited into an account on your behalf. For non-employer associated retirement savings, you will have to set up automatic deposits from your bank account. The cool thing is that you can typically save as little as $25 a month to start saving toward retirement! That’s like one night out at a restaurant or 5 lattes.
Priority 3: Long-Term & Short-Term Goal Savings
Saving for long-term goals, like cars or houses, can feel like a daunting task, but with a clear goal in mind (i.e. deadline and total amount to save) it is something you can easily work into your monthly budget.
Say, for example, you just paid off one of your cars. Chances are you might need to replace said car in 5 years. For the next 5 years you could “pay” a car payment to a savings account so you can buy your next car with cash or have a sizable down payment. Heck, you were already making a car payment…will you miss it THAT much?
Priority 4: College Savings
You read that right. The last priority on your “pay yourself first” list is college savings. I know you love your kids, but there are ZERO grants or loans for senior citizens. Unless your retirement plan includes being a boomerang parent, you’ve got to put your current finances first and worry about the kiddos later. Once you’ve minimized debt, got your emergency savings on lock, and set up your retirement savings plans THEN and only then should you look at college savings.
There are tons of options out there when it comes to saving for college, but our fave is the 529 plan. Not sure where to start? Check out Morningstar’s 529 ratings.