Savings

Now I know you know all about the importance of thtacking your thips, I won't go over that. But I will touch on HOW you want to go about saving and the different buckets you want to set aside.

High Yield Savings Account (HYSA):

A high yield savings account is one that accrues interest. It is significantly better than the one attached to your Navy Federal account. In your Navy Fed account, your money just sits there doing nish whereas money in an HYSA compounds interest. A good HYSA offers at least 4% interest. Mine, for example, offers 4.4% which is a great rate, my account is through Ally bank. I aim to put at least $50/check into this account. Your HYSA is going to be your long term savings account, this is where you're going to want to keep your life savings. You don't have to use the bank that I use, there are plenty of great options, you can find an article about some different options here.

Roth IRA:

A Roth IRA is a tax free retirement account. What does this mean? It means that, unlike a 401k, you won't be taxed on money when it's time to withdraw from your account. For context, a 401k is usually offered through jobs and you can set it up to take money from your paycheck and put it into a retirment account. Because this money is drawn from your pretax income, taxes will be subtracted when you withdraw the money when you're old enough to. The money that goes into your Roth IRA is money that has already been taxed that you put into the account yourself. So when you withdraw the money, you get all of it and don't have any taxes subtracted. Both are good to have, a 401k has a yearly contribution limit of $22,500 as of 2023 and a Roth IRA has a yearly contribution limit of about $6,500. In case it wasn't clear, this means that that is the maximum amount of money you can add to those accounts each year. "Can't I just open multiple accounts to contribute more?" I wish, those contribution limits are across all accounts so even if you have 10 Roth IRA accounts, you can only contribute $6,500 to them in total.

Sinking Fund:

This one falls in between saving and spending because it's savings that you are meant to spend. An example of a sinking fund would be your budget for Christmas gifts. Say you save up $500 and that's what you plan to use to buy everyones gifts. That is a sinking fund because you're saving it in order to spend it on something specific. Some good sinking funds to have are ones for gifts, travel, and car stuff. You can set aside a certain amount for each of these buckets and just pull from there when it's time to spend.