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Most personal finance experts will tell you that you need to have a “why” in order to reach your money goals. We tend to agree — if you don’t have something motivating you, then what’s the point?
But often, we have more than one money goal, and there is a definitive hierarchy when it comes to prioritizing what to focus on. For instance, you may know you need to open a retirement account and start investing, but that’s pretty impossible to do if you don’t currently earn enough to cover your basic expenses.
We put together the following quiz to help you determine what your next money move should be. Bear in mind that these are purely suggestions based on what we believe to be responsible money choices — but no two people have the same exact money situation, and your mileage may vary. This quiz won’t give you all the answers (we can’t tell you exactly how much to save each month!), but it will provide a straightforward idea of what money moves you should be prioritizing.
1. Do you have at least 3 months of an emergency fund saved if you’re single, or 6 months saved if you have a family?
YES → Proceed to question 3.
NO, BUT I’M AGGRESSIVELY PAYING OFF DEBT → Proceed to question 2.
NO, AND I DON’T HAVE DEBT → Stop here. Focus on fleshing out your emergency fund in liquid savings, such as a high-yield online savings account, before focusing on other money goals.
2. Do you have at least 1 month saved in an emergency fund?
YES → Proceed to question 3.
NO → Stop here. We know how harrowing debt can feel, but especially in our current, unpredictable economic landscape, it’s more important than ever to have an emergency cushion. Try to save up at least one month’s worth of expenses in a liquid savings account (while continuing to make your minimum debt payments, so you don’t ding your credit score) before directing extra money towards debt.
3. What is your current debt situation?
I HAVE HIGH-INTEREST DEBT, LIKE CREDIT CARD DEBT → Stop here. Consider focusing on your debt payoff before working towards other money goals. If you have a super high interest rate, you may want to consider various approaches to paying off your debt, like applying for a balance transfer card with a 0% APR period, refinancing, or consolidating multiple debts. Your available options will depend on your specific circumstances, like the amount of debt you have, your debt-to-income ratio, your interest rate(s), and your credit score. Your goal is to get into a debt payoff plan that allows you to work towards getting out from under your debt while also being able to work towards other money goals. Read more about consolidation and refinancing here.
I HAVE LOW-INTEREST DEBT, LIKE STUDENT LOANS → There are a lot of different schools of thought on how quickly you should pay off your student loans. While some people prefer to pay them off as quickly as possible to relieve themselves from the emotional burden of debt, it may pay off in the long run to put extra money towards investments (alongside your minimum debt payments). Use a student loan calculator to determine whether you’re in the best payoff situation for your circumstances, or whether you should look into refinancing. If you’re happy with your debt payoff plan, proceed to question 4.
I HAVE A MORTGAGE, CAR PAYMENT, OR OTHER INSTALLMENT LOAN → If you’re having trouble making your payments each month, consider looking into your options, like refinancing. If you can currently afford your payments and have extra money left over from each paycheck, proceed to question 4.
I HAVE NO DEBT → Proceed to question 4.
4. Are you currently maxing out your retirement account, including employer contributions?
YES → Proceed to question 5.
NO, BUT I AM CONTRIBUTING SOMETHING EACH MONTH → Consider increasing your monthly contributions to 15-20% of your gross income before tackling other money goals. If you’re already doing that, proceed to question 5.
NO, I HAVEN’T STARTED INVESTING IN RETIREMENT → Stop here. If you have room in your budget, it’s time to open your retirement account, or start actively investing in the one you already have! Find out more about different types of investments in our video here.
5. Do you have extra money left over at the end of each paycheck?
YES → Proceed to question 7.
NO → Proceed to question 6.
6. Look at your current budget — is there anything you’re paying for that you really don’t need or use?
YES → Stop here. Make some budget cuts where possible, and start contributing your savings towards retirement.
NO → Stop here. Before you can start saving more or working towards other money goals, it’s likely you need to focus on earning more. Now is likely not the best time to negotiate a higher salary, so if that’s the case, look into adding an additional stream of income through freelancing or a side hustle.
7. What is your next most pressing money goal, beyond investing in retirement, paying off debt, and saving for emergencies?
SAVING FOR A MAJOR PURCHASE, LIKE A HOUSE DOWN PAYMENT → Consider your timeline. Are you saving for a purchase you’ll make in the next 5 years? If so, you most likely want to save that money in a high-yield savings account or CD, rather than investing it. And if you want to increase your savings contributions each month, look into whether it’ll be more feasible from making cuts to your current budget or increasing your income. If you’re saving for something on a much longer timeline, investing may be a good option. We recommend speaking with a trusted financial advisor before making your next move — good luck!
SAVING FOR A SHORT-TERM GOAL, LIKE A VACATION → You typically don’t want to invest any money that you want to spend in the next few years, due to the inherent risk of the market. However, make sure you’re putting your savings into a high-yield savings account, as the interest rates are usually better than those that come with a traditional bank. Shop around for the best current rates before choosing your provider.
If you’re looking for a simple way to finally start investing what you save, you should check out our sponsor Fidelity. Their team is here to help you reach your money goals. Fidelity’s no-nonsense approach to investing could help give your money the potential to grow. Click here to get started today.
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