The Most Important Financial Step To Take at 4 Fiscal Milestones
Written by
Brooke Barley
Edited by
Jenna Klaverweiden
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There’s a lot of advice on how to reach financial goals, but what should you do once you reach them? First of all, congratulations! It’s hard work to achieve a financial milestone. However, finances are a marathon, not a sprint.
There’s always something more to do when it comes to your finances. Here’s what experts say you should do once you’ve reached significant financial goals.
You Built Your Emergency Fund
An emergency fund should have between three and six months’ worth of living expenses. With one, you’ll have the money in the case of job loss or if another big expense comes down the line.
Gary Gray, co-founder of CouponChief, said that once you have a comfortable amount saved for emergencies, you should keep those good savings habits going and use them for investing.
“Once you’ve successfully created your emergency fund, you should set up automatic contributions toward investing. Using automations helps prevent lifestyle creep and keeps hard earned momentum and habits going,” Gray said.
You Paid Off Your Student Loans
No matter if you left college four years ago or 40 years ago, paying off your student loans is impressive. However, there’s no reason to stop saving. Instead, take that amount you were using to pay off your loans and put it toward something else that will improve your finances.
KJ Dykema, founder of Family Retirement, said the next step depends on your lifestyle. “If the interest rate (APR) on your mortgage is high, paying down your home may be the best option. However, if your APR is low and you don’t plan to move in the next few years, your money may be more efficiently used in an after-tax investment account,” Dykema said. “This allows your assets to grow above inflation, be taxed at capital gains rates, and be withdrawn before traditional retirement age for any purpose.”
If you decide to invest the money, Dykema suggested focusing on growth stocks with little or no dividends to avoid unnecessary taxable income while maximizing long-term growth potential.
You Bought a Home
Having the capital to buy a home and invest in an asset that could be passed down through generations is a tremendous investment. However, with a home comes new expenses.
Olivia Grant, who leads research and insights at ExpertSure, said to put aside money every year for home repairs. “When you purchase a home, it is important that you save 1% of the home’s total cost each year in order to have funds available to cover unexpected expenses such as a $5,000 boiler repair which could cause you to lose all the progress you made financially,” Grant said.
You Became Financially Independent
This is a huge accomplishment. However, if you no longer need income to support you, it’s important to remember that your financial work isn’t done.
“Protecting your wealth is the next step after reaching financial independence through estate planning and an appropriate withdrawal rate, to make sure your wealth lasts your entire lifetime,” Grant said.
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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