Amid Economic Uncertainty and a Possible Recession: How to Save and Invest

How to budget, invest and catch up on your retirement savings

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Your net worth is essentially the sum of all your assets — cash, retirement accounts, college savings, house, cars, investment property, and valuables like art and jewelry — less any liabilities or long-term debts, such as a mortgage or student loans, credit card balances, Car loans and all other personal loans.

If your net worth is negative, which is not uncommon, you need to work on saving more and spending less.

2. Try to follow the “60% solution”. To figure out how much money to spend and save, create a monthly budget for your necessary and discretionary spending, as well as long-term and short-term savings.

The 60% solution is a budgeting strategy that I think works well.

  • The first 60% of your gross income (all the money you bring in in the month) goes into “fixed expenses,” which includes all taxes, housing costs (rent or mortgage plus utilities), credit card payments, and anything else you need to pay each month.
  • The next 30% goes into savings — 20% into long-term savings, including 401(k) plans, individual retirement accounts and other similar products, and 529 college savings plans, and the 10% into short-term savings like your emergency fund.
  • The remaining 10% is “fun money” that you can spend on whatever you want.

3. Use a spreadsheet, software, or mobile app to track your income and expenses: Now that you have an idea of ​​where you want your money to go, you need to know where it is going now. Track your income and expenses in a spreadsheet or app.

You can use a spreadsheet like Google Sheets, try budgeting software, or download an app like Mint or Goodbudget. There are numerous free budgeting tools available online and for your smartphone. Find a tool that shows your income, expenses, and savings goals — and helps you manage your money to improve your overall net worth.

“I have decent savings and know that I could make money with them.” But I’m scared of the stock market. Any advice for a beginner?’

Before you start investing, outline your priorities and your financial goals. Focus on funding emergency savings, paying off high-interest debt, and investing in retirement accounts.

Make sure you have an emergency subsistence fund for at least three to six months. Top interest rates for high yield savings accounts are currently almost 5%.

Ken Tumin, founder and publisher of, recommends opening an online savings account linked to a checking account at the same bank, and then you can move cash back and forth. “It makes it really easy,” he said. “You can put the money you don’t need right away in a savings account and get a decent return – more than we’ve had in more than 10 years.”

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If you have high-interest debt, e.g. B. Credit card debt, work to pay it off. That represents a significant return: The average interest rate on a credit card is more than 20%. Although the stock market as a whole is in recovery mode, the S&P 500which tracks the shares of 500 of the largest US companies, is up just over 7% year to date.

You want to invest your savings in stocks for maximum growth over a long period of time, say the next decade or more. Start investing as much as you can into your retirement account at work, e.g. B. with a 401(k) or 403(b) plan, or on your own with a Roth IRA if your job doesn’t offer a plan. If you’re self-employed, you can put even more money into a Solo 401(k).

Consider investing in an S&P 500 index fund as your first stock investment. Investing your money in the stock market depends on your financial goals, risk tolerance, and when you need the money.

Start with this S&P 500 fund as the core of your retirement account, suggests Winnie Sun, co-founder and CEO of Sun Group Wealth Partners, based in Irvine, Calif., and a member of the CNBC Financial Advisor Council. “You can add more stock mutual funds and exchange-traded funds as your portfolio grows,” she said.

If you don’t want to take a lot of risk, stable value funds that invest in a mix of bonds might also be worth considering as interest rates are currently quite high, she added.

Once you have sufficient emergency funds, no or little high-interest debt, and have paid the maximum amount into your company pension scheme – or at least enough to match your employer’s contribution, if one is offered – you can open a brokerage account, to invest alone.

Make sure you list your financial goals so you know why you’re investing and when you’ll need the money: for college, buying a home, or leaving money for loved ones. Working with a financial advisor can also help you stay on track.

“I’m in my mid-50s and don’t feel like I have enough money saved for retirement.” How do I calculate how much money I need and how long should I plan for retirement?

With inflation, many Americans worry they may not have enough money to retire, but your life expectancy may be an even more important factor. Depending on retirement income, you can live well into your 80s or beyond, 15 to 20 years or more.

These two planning tips may be helpful:

Do a “pension check”: Consider the age at which you would like to retire or stop working full-time, and consider any Social Security or other benefits you would be receiving at that point. If you are in your mid-50s, you will receive your full Social Security pension at age 67. If you retire early at 62, your benefits will be reduced by 30%. But if you postpone retirement until age 70receive 124% of your full retirement pension.

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Also think about how you want to live in retirement. Will you have the same lifestyle? Downsizing into a smaller house? Will you move to an area where the cost of living is lower than where you are now? Where you live and how you live can have a significant impact on your spending.

Create a “precautionary budget”: Create a trial budget for your retirement. Consider your everyday expenses such as housing costs, groceries, health care and long-term care in the city where you plan to live.

It’s a good idea to talk to loved ones about what plans you have in case you need care and build this into your retirement savings.

Winnie Sun

Managing Director of Sun Group Wealth Partners

“About 70% of people age 65 and older will need some type of long-term care at some point in their lives,” Sun said. “It’s a good idea to talk to loved ones about your plan in case you need care and build that into your retirement planning.”

Moving to a less expensive area can help reduce overall costs. Downsizing your pension may eliminate some of the costly expenses you have now, such as B. your mortgage, or are significantly reduced, reducing your total expenses in retirement.

Next, add up any income you could earn in the years after you retire. Factor in retirement income if you have it, Social Security payments, and any other dollars that might come your way, such as: B. Rental income from a property. Compare income and expenses and you’ll get a good idea of ​​what you’ll need to save for each year of your retirement.

If you think your current savings don’t have enough money for retirement, plan to start working part-time when you retire — and increase your retirement contributions now.

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