You’re thriving in your career. Your home is bustling. Your schedule is busy. Your tax bill is big.
You’d like to take family vacations and do occasional home projects and put your kids through college.
And you know you should be saving a healthy amount for retirement/future financial security.
So how do you balance these competing priorities?
It’s a challenging question with a million different answers based on your priorities, circumstances, starting point, tax situation, and many other factors.
But one potential option to work from to get your wheels turning is a 5×5 savings framework:
5 categories to save 5% of your household gross income regardless of how much you make:
- 5% to qualified retirement accounts (pre-tax 401k / IRA / HSA contributions)
- 5% to Roth 401(k) or Roth IRA contributions
- 5% to a taxable brokerage account
- 5% for shorter-term goals (home projects, new car, vacations, etc.)
- 5% to college savings
That’s saving 25% of your income with intention. The other 75%?
Live your life. Be generous. Pay your bills and taxes.
Of course, everyone’s situation is different. For our clients, we customize the savings plan to their unique situation, help them execute their customized plan, and adjust the framework as life evolves.
But if you’re able to use a framework like this to establish balance and buy financial flexibility, you’re off to a great start.
Investment Advice offered through FC Advisory LLC, a registered investment adviser doing business as “Financial Coach” and as “New Wealth Project”. This content is provided for informational purposes only and is not intended as personalized investment advice. Information provided is not and should not be interpreted as investment, tax, legal, or other professional advice or recommendation by FC Advisory, LLC or the members of our firm. Always consult the appropriate professional regarding your specific situation before implementing any options presented or inferred.
