4 Tips To Build Your Nest Egg This Easter
This Easter, while the kids around you hunt for colorful eggs and the goodies within, you should reset your sights on another kind of egg: your nest egg.
Easter rolls around just once a year, but your nest egg should remain a top concern all year round. As you prepare to celebrate this spring, here are four tips to help you grow your nest egg for years to come.
1. Make Smart Use of Your Tax Refund
This year, Easter falls just a couple days before the U.S. tax deadline, which is Tuesday, April 18. If you are expecting a tax refund, it could be a great opportunity to jump start your savings.
While you may be tempted to rush out and splurge on something fun, there are much better uses for this chunk of cash that could actually pay off in the long run.
Have high-interest debt? One of the smartest things you can do with your refund is to pay it down. After that, it’s a good idea to make sure your emergency fund is fully funded. Experts typically recommend having three to six months’ worth of living expenses in any emergency fund.
All set on those fronts? Consider making an extra contribution to your Roth or traditional IRA. You can even have the IRS deposit your refund directly into your IRA account if you need help avoiding the temptation to spend it elsewhere.
For more information, check out Six Smart Uses For Your Tax Refund.
2. Take Full Advantage of Tax-Advantaged Accounts
You have many options when it comes to saving, but it may pay—literally—to look at tax-advantaged accounts for everything from your retirement and college savings goals to healthcare expenses.
While how tax-advantaged accounts work varies from account to account, they all offer tax benefits that could offer you a bigger paycheck now or a bigger paycheck down the road. They may also allow your money to grow tax-free, which can have major implications when you are holding investments for a long period of time.
And remember this Easter weekend: you still have another couple days to max out tax-advantaged accounts for the 2016 contribution year. Read up on that here.
For more information for tax-advantaged college-savings options, check out The ABCs of ESAs and 5 Things Every Family Should Know About 529 Plans.
For more information on tax-advantaged health expense savings options, check out The ABCs of HSAs and FSAs.
For more information on tax-advantaged retirement accounts, check out IRAs 101: What You Need to Know and The College Grad’s Guide to 401(k)s, or for the self-employed, No Employer? No Problem. Retirement Plans for the Self-Employed.
3. Automate Your Savings
A critical part of a successful savings strategy is actually putting your money into your savings account. If you keep your extra cash in your checking account, you may be more tempted to spend it. And most checking accounts don’t earn any interest.
Take the step today to set up a regular, automated transfer. Banks and financial firms typically allow consumers to schedule regular money transfers to a savings, money market account or IRA. Doing so will make it easier to budget. You can treat that automatic transfer just like any other utility payment.
Plus, it’s more convenient and efficient than scheduling transfers or writing checks every month, said Brent Neiser, Senior Director of Strategic Programs and Alliances at the National Endowment for Financial Education.
For more information, check out 6 Tips to Boost Your Savings.
4. Set Clear Short-Term and Long-Term Goals
An important part of any saving strategy is to have very clear short-term and long-term goals. It’s hard to stay dedicated and focused if you don’t have a clear picture of what you are saving for.
In fact, savers who report working toward long-term goals are much more likely than those who do not to be satisfied with their personal finances, to spend less of their income, to have no difficulty making ends meet and to have set aside emergency funds, according to the FINRA Financial Education Foundation’s Financial Capability Survey.
This spring, sit down and establish a clear vision for your short-term and long-term goals, and figure out how much you should set aside on a monthly basis to meet those goals.
Certain financial goals are extremely important, such as saving for retirement (experts suggest putting aside at least 10 percent of monthly income) and building an emergency fund. In addition, do you want to cut down your credit card debt? Do you want to save for a down payment on a home? Maybe you also want to put aside money for a vacation or a child’s education? These are all sound financial goals.
Why is saving for a vacation a good financial goal? Because it’s important to make sure you have short-term goals as well. If you are only focusing on saving for events far in the future, your long-term goals can begin to feel overwhelming. Your short-term goals can help you stay on track toward achieving those big, long-term goals.
For more information, check out How To Create A Budget And Stick To It In 7 Steps.