One such milestone that is a great financial achievement in and of itself, but also opens up many doors setting yourself for success once you reach it is quater million dollar savings. To build, preserve, and capitalize on your hard-earned savings — the must-do basics. This guide has got everything you need to know about how to secure your financial future for every age, from investment options to emergency fund planning. Keep reading to find out how you can maximize that $50,000 savings goal with the help of experts!
Particulars: Things You Must Do When Your Savings Hit $50,000
Establish an Emergency Fund: This is saving 3-6 months worth of expenses.
Get Rid of All Expensive-Debt: Paying off costly debt can help eliminate expenses and give you more cash-flow
Invest Wisely: Spread your investments across retirement accounts, brokerage accounts, and feel free to add in real estate as well.
Plan for life objectives: Use it to save money for big goals like your education, travel or starting a business.
Re-evaluate Financial Goals: Make sure to look over any savings or investments associated with your newer financial goals.
Having saved $50,000 is an opportunity to move towards preparing your financial future. Doing these simply ensures you are confidently making the most of what your savings have to offer while preparing both short- and long-term plans for success.
Check this out: 5 Best Places in the South to Purchase a Home for Under $250K
Things You Must Do When Your Savings Hit $50,000
Hitting a $50,000 savings is an accomplishment and milestone. Your savings at this point can be used as a base for future investments, an emergency safety net, etc. But getting to this point also means determining how you want to spend, invest and protect your money. Here are a few things you should consider once you hit $50,000 in savings.
Creating or Beefing Up a Rainy Day fund
It’s always a great idea to have one, regardless! If you need one, spend part of that $50,000 savings on making one. Or if you already have an emergency fund, maybe make it larger.
Money to Keep on Hand: You want 3-6 months’ worth of living expenses in an easily accessible account, like a high-yield savings account. The actual number here will vary based upon your personal situation, including the size of your family, whether either partner is employed and how much you owe each month.
Account Type: Insure that funds needed for emergencies are kept in a low risk yet interest earning account such as high-yield savings accounts. And this allows you to still get a decent amount of yield without putting your capital at risk or locking away access to it.
Pay Down High-Interest Debt
If you have debt at a high interest rate — think credit cards, payday loans or personal loans with high-interest rates — then it may be time to get that down. Most types of high-interest debt have rates greater than 15% that will reduce your returns more than actual investing would.
Why This Is Important: High-interest debt negates all of the returns you were hoping for from investments, as they would only be exceeded by the expense of interest, more than likely before nut nuts even enter a savings account or investment.
Debt Repayment Methods: Apply an avalanche (highest-interest debt paid off first) or snowball (smallest balance first) strategy to assist your systematic plan of attack in paying down your debt. When combined, both approaches can shorten the process and reduce overall interest in the long run.
Open Investment Accounts for More Diversification
Having $50,000 in savings gives you a chance to explore further investment options for your money. Once you have an emergency fund, and are working to pay off debt, use the rest on starting or adding to your investments.
IRA / Roth IRA: Try and throw this into a tax-advantaged retirement account. These accounts provide taxes advantages that can help you grow your savings in the long run.
Brokerage Accounts: If you want to be able to invest but have access to your money before retirement, a taxable brokerage account provides that flexibility. This account should be made up of a bunch of different types of low-cost index funds or ETFs (to reduce risk but also earn return).
Robo-Advisors and Automated Investing: For those who are just starting their investment journey, robo-advisors will allocate your funds into diversified portfolios per your risk tolerance and financial goals. Services like Betterment and Wealthfront offer selection of ETF portfolios and provide easy solution for managing investments.
Take Full Advantage of Retirement Accounts
Retirement planning comes before big purchases once you have a monthly budget covered and an emergency fund. Once you hit the $50K mark have a peek at tax advantaged retirement accounts like a 401(k) or IRA.
GET YOURS: If you work for a company that has a 401(k) match, put in enough to get that free money. This is literally free money that increases your retirement savings.
IRA and Roth IRA: Tune Into the Traditional or Roth IRA Based on Your Income Level With tax-deferred growth for traditional IRAs and tax-free withdrawals in retirement for Roth IRAs, they both play important roles in efficient tax savings.
Catch-Up Contributions: If you’re age 50 or older, consider utilizing catch-up contributions that allow you to contribute above the annual limit in your retirement account, thus accelerating your retirement savings.
Invest in Property
Investing in real estate represents a strong opportunity for those with $50,000 of savings because real estate can generate income and tend to hold there value over time.
Real Estate Investment Trusts (REITs) and Real Estate Funds: These vehicles allow you to invest in real estate, but not by owning a property. Since REITs are known to pay dividends, they can be more attractive for investors who are focused on income.
Direct Ownership in Property: If you prefer a more active management style, $50,000 can become the down payment on an investment property. Think about the costs and liabilities that come with being a landlord and research as much as possible before this transition.
Real Estate Crowdfunding: If you dream of being a property tycoon but have not saved enough for a million-dollar downpayment, real estate platforms like Fundrise and RealtyMogul lets you purchase shares in commercial or residential real estate without having to own an entire building yourself.
Save for Major Life Goals
After building a solid savings foundation, you may want to consider allocating some funds for major milestones such as education, travel or starting your own business.
Use a 529 Plan for Higher Education: If you are about to go on to a higher level of education, or if someone in your family is, open a 529 plan with tax benefits.
Business Expenses: If there is entrepreneurship in you, save for business start-up costs. Your savings can be enough to get your plan off the ground with proper planning, without seeking outside investors.
Experience Bucket: Set aside a portion of your savings for experiences that add value to your life, like traveling or other types of experiences. Saving for travel you were already planning, or investing in hobbies or experiences will make reaching your personal finance milestones all the more enjoyable.
Evaluate Your Insurance Needs
Once you hit a certain level of savings, number one priority becomes protecting yourself and your assets. Insurance provides financial protection that may come in handy to cover unexpected losses.
Health Insurance: Make sure you have sufficient health insurance coverage Medical expenses are among the top causes of financial difficulties, so having a plan should be prioritized.
Disability and Life Insurance: Disability insurance can help protect your income from injury while life insurance is beneficial if you have dependents that rely on your income. Your family needs protection from your demise, and that is usually cheap with term life insurance.
Home and Auto Insurance: Review your home and auto policies from time to time to avoid being under insured or make overpayment. Annually, shop for a better competitive rate.
Reevaluate and Revise Your Financial Plan
Half a hundred grand is also a good point at which to re-evaluate your goals.
Create New Savings Goals: Now that you have $50,000 in the bank, you may wish to set new goals for yourself, such as saving up to $100,000 in savings or working on your investment portfolio or purchasing a home.
Plan a Diverse Financial Portfolio: If you have not done it yet, try to talk to an economist who will help you find out how well your savings and investment plan is. Does it match both short- and long-term goals?
Continued check-ins with financial documents — schedule a financial check-up semi-annually or annually to see how you are tracking against those goals and adjust as necessary.
