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Colin OShea

March 13 , 2017

Investment Basics: Rate Your 2017 Finances

Rate Your 2017 Finances

Welcome to Rate Your Finances, the match-up that rates couples’ financial health and determines whether they’re making progress toward their goals. Today, Sam and Sally Saver compete against Cal and Carla Carefree. The winner walks away with a head start toward a secure financial future. 


Round One: Setting Goals


Sam and Sally Saver have identified several goals they’re saving for. Some, including buying a new car and traveling cross country, are things they plan to do in the next few years. To save for these goals, Sam and Sally invest in short-term securities, such as money market funds,* that pay interest without much risk to principal.


Down the road, Sam and Sally plan to buy a house. Because they have a longer time frame to save for the down payment, they’ve invested a portion of their money in stocks to benefit from their potential to earn higher returns. To further boost their savings, Sam and Sally contribute their year-end bonuses to their accounts.


Cal and Carla Carefree haven’t set any concrete goals. They’d like to buy a house “someday,” but they have no specific plan to save for a down payment. Without establishing objectives and mapping a course of action to reach them, Cal and Carla have little chance of saving successfully. Until they decide on specific goals, they’re likely to remain financially adrift.


Winner of Round One: Sam and Sally


Round Two: Planning for Emergencies


Sam and Sally Saver realize an unexpected expense or income loss can destroy a budget. Every payday, they deposit money in an “emergency fund.” Their goal is to always have six months’ worth of living expenses saved. If they’re faced with an emergency, they’ll have money to help them through it.


Cal and Carla Carefree tend to live paycheck to paycheck without putting money aside for emergencies. When their car broke down recently, they didn’t have any savings to pay for repairs so they charged the repair bill to a high-interest credit card. If they can’t pay off the balance quickly, the repair will end up costing them a lot more than the original bill.


Winner of Round Two: Sam and Sally


Round Three: Saving for Retirement


Sam and Sally Saver know they’ll probably need more money for retirement than for any other goal they have. So they started contributing to their employer-sponsored retirement plans as soon as they became eligible. They’re already taking full advantage of the company match, and both increased their contributions in 2017. Because they started saving early, Sam and Sally have many years to benefit from potential growth and compounding of their retirement savings.


Cal and Carla Carefree haven’t thought much about retirement. They’re too busy spending their paychecks on expensive items they don’t really need. Although their employers offer retirement plans, neither Cal nor Carla participates. They believe they’ll have plenty of time to save when retirement gets closer. In reality, they’re missing out on years of compound growth and the “free money” provided by their employers’ matching funds.


When it comes to their finances, it looks as if Sam and Sally Saver are the clear winners!


If you have any questions on the above, contact a Security National Bank financial professional to your financial planning. 


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* An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

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