You’re saving all right. You’re just putting your money in the wrong place. Read More...

Saving money is like eating healthy, sleeping or exercising. All the expert advice tends to boil down to one thing – you should do more of it.

But while working hard is great, working smart is even better. You can save every spare penny you earn, but planning for your financial future isn’t just about being frugal. You need to make sure that money is allocated properly and put to specific use.

Think of it like eating a balanced diet versus living on broccoli, chicken breast, and tap water. Sure, those are very healthy options, but a good diet requires some diversification and a little forethought to prevent vitamin deficiencies. Planning for your financial future takes a similar approach.

Your savings are a powerful tool – are you putting that money to good use?

The wrong place for your emergency fund.

When I ask people where they keep their emergency fund, they often say something like, “Oh, it’s in my regular checking account.”

Wrong. Keeping your emergency fund in your everyday checking account is like keeping a box of cookies on the counter when you’re on a diet. You should store your emergency fund like you’d hide the last box of Thin Mints — out of sight, out of mind. Otherwise, you’ll be tempted to spend your money.

Other people have told me they invest all or part of their emergency fund — another bad choice. Since you can’t plan on when you’ll need your emergency fund, you shouldn’t risk it in the stock market.

(Miranda’s note: Actually, I have a bit of a disagreement here with our writer. I even keep part of my emergency fund in a taxable investment account. See how I emergency fund in this video done for Facebook Live.)

An emergency fund should always be liquid or easily accessible, like in a savings or money market account. Some consumers store theirs in a certificate of deposit (CD),  which has a maturity date. If you access your CD beforehand, you may forfeit several month’s worth of interest and pay a fee.

Carefully consider how and when you might need to access your emergency fund and come up with a plan for making sure you get the money you need.

The wrong place for your retirement fund.

A few weeks ago, my friend Martha asked me if she should move her IRA account to a different bank. She had been investing steadily for a few years but hadn’t seen any huge returns. For the past eight years, we’ve seen the second-longest bull market on record, so Martha should have seen growth in her IRA.

I asked her what she was investing in.

“Nothing,” she told me. “I didn’t realize an IRA was an investment account.”

Martha made a classic error I see from lots of new investors. They open an IRA or a 401k, fund it every month and then fail to choose investments. The money languishes in their cash settlement account, not growing at all.

Thankfully, Martha caught this mistake in her late 20s. A financial planner friend of mine told me about a client who spent decades depositing money in her IRA without making sure she was actually investing. She was in her 50s when he realized what was happening. If she had been investing, she could have retired already. Now she has to work at least another decade.

If you already have an IRA or 401k set up, access your account to see where that money is actually going. Is it set up in an index fund, a bond fund or a target-date fund? Or are you like my friend Martha?

You don’t want to be saving enough for retirement but putting it in the wrong place. The key to growing wealth over time is the right amount of money combined with consistent investment over a couple of decades.

Call the customer service department if you’re confused on how to select a fund since these websites can be painful to navigate. I had to do this when setting up my IRA with Vanguard. Not sure what kind of fund to choose? Talk to a financial planner who can take into account your age, current portfolio and risk tolerance to create an appropriate mix.

The wrong place for your short-term savings.

My friend Lauren recently told me she was saving for her down payment in an Acorns account. Acorns is an app that rounds up your transactions to the nearest dollar and invests the difference in low-fee funds. It’s a great app for people who want to maximize their investments without doing a lot of legwork.

She was probably saving enough each month to work toward her goal. However, because the money was in the stock market, a large market event could have wiped out the down payment fund and ruined her plans.

Investing the money you might need within a couple years means you’re gambling with your savings. Sure, the market might go up and you could see a boost to your car fund or vacation savings goal — but stocks could also drop, leaving you with less.

Here’s what I do: My husband and I have separate savings accounts for our car repair/replacement fund, down payment fund, and vacation fund. If we need to pay for an oil change, I can transfer the money from our car repair fund into our regular checking account.

Our savings accounts have an interest rate of 1%, so we earn a few bucks every month. It’s not the double-digit returns we’d get if we invested the money, but there’s no risk of losing the principal.

Figure out where your money should be.

Yes, you need to make sure you’re saving enough money for your goals. But it’s also important to consider where you put that money. For long-term goals like saving for retirement and paying for your child’s college, you can consider using index funds and dollar-cost averaging over time.

With shorter-term goals, more liquid accounts with a guarantee of principal can make sense. Think about when you might need to access your money, your current risk tolerance, and plan accordingly.

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More than 6.5 million people in Florida were instructed to evacuate before Hurricane Irma struck the state. Leaving everything behind is not easy for a family — and it’s not cheap. While insurance may cover damage due to the storm, how do you handle the expenses you have when you need to change your plans with a moment’s notice?

You need an emergency fund. It’s one of the first steps for preparing for the unexpected — and handling your money like an adult. If you don’t have an emergency fund yet, you need to start it now.

Here are some of the best banks for emergency funds today — because they pay out some of the highest rates.

My friend’s brother lives in Florida, and his home was hit hard by Irma. He, his wife, and his daughter secured their home as well as possible and left town, driving with thousands of others north, away from where the hurricane would do the most damage. Because he had an online savings account with CIT bank, an emergency fund for the family, they were able to come up with the money they needed to get out of town and stay in a hotel for a few days before reaching family.

Start that emergency fund now.

Add to your emergency fund little by little. Transfer a small portion of every paycheck. It won’t hurt you to miss 1% of your pay today, and it will help you later when you need to come up with money fast.

Could you make more money by investing your money in stocks instead of a savings account? Sure, but it could take more time to withdraw the value of those stocks when you need the money, and chances are good you’ll need the money at a time when the stock value is lower than you’d hope.

Add the taxes you have to pay on top of that, and it’s easy to see why investing is not a good option for money you might need in an emergency. That’s why high-yield savings accounts are the best options for emergency funds — like the one you need to withstand the next hurricane.

Choose a bank below to start your emergency fund.

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Financial stability is a requirement for successful adulting. Here’s how you achieve stability and recognize it when you are stable. Read More...

If financial independence is the dream, financial stability is the first adult step along the path towards that vision.

On the final day of the year, fifteen years ago, I returned home from a weekend away to find my belongings on the lawn in front of the house I was renting. (I used the Internet Archive’s Wayback Machine to fact-check myself using my old, anonymous personal blog, my first time reading those entries in over a decade.)

My roommate thought I was moving out at the end of December, and when I wasn’t around, she moved two people into the room I had been occupying for several months. I had been planning to move out at the end of January, and the roommate knew this. But my name wasn’t on the lease, so perhaps she thought she could do whatever she wanted.

A later entry brought back the memory of a related event: I visited that apartment again ten days later to pick up a few remaining items, and the new occupants were moving out because that roommate committed some kind of check fraud. But I digress…

Being forced out of my living space with no notice on New Year’s Eve was the end of a particularly bad year. I lost a job, lost my car, and lost my girlfriend. I had moved to northern New Jersey for a job I no longer had. I was in my mid-twenties, but I wasn’t financially an adult. I survived by spending on credit cards, avoiding student loan bills, and accepting help from parents.

With the necessity of moving in with family as 2001 became 2002, I vowed to turn things around for myself.

I wasn’t necessarily aware of the idea of financial independence, but thankfully, that is how I can describe my situation today. In early 2002, I just wanted financial stability. And I had to figure out how to get there.

How I became financially stable.

After college, I chose a career somewhere between education and nonprofit. The organization I was working for was meant to be a stop-gap while looking for a teaching position, but I did enjoy it, and I didn’t put enough effort into moving forward. It cost me more to work as a nonprofit employee than I was earning — and I wasn’t even spending a significant amount of money.

1. I found a new job.

Instead of looking for my ideal career, my priority was earning money and getting back on my feet, taking control of my situation. Nothing is permanent. I could work on my loftier life goals while at least working somewhere during the day that would allow me the flexibility to plan for the future.

Without a car, I was limited to jobs that were accessible by walking or by traveling on the train. I turned to a technical temp agency. That’s how I earned money over breaks during college, and I knew I had many skills that would serve me well in corporate settings. I found something right away — an executive administrative assistant at a major financial firm.

This had no relation to my degree, but it was a job. And it paid 50 percent more than what I was earning at the nonprofit organization. Theoretically, I could even stay involved with the activity I was passionate about on weekends while working a “regular” job.

2. I designed a budget.

My dad helped me brainstorm a basic budget on the back of an envelope. That’s how I remember the situation. This budget had to take into account paying off a cash advance from my credit card, consumer spending on my credit card, and my student loans. I intended to move out and be less of a burden on family as soon as possible, so I budgeted for rent, as well. And savings for the future.

Partly because I wanted to stick to my budget and partly because I needed some self-reflection time to recover from bad choices, I also saved money in the first few months of my new job by staying in a fortress of solitude.

The budget was essential for setting myself up for financial stability.

3. I tracked every penny.

I used free software to meticulously track my spending, making sure I was staying within my budget and paying my bills on time.

You can only have a clear picture of where you’re going financially if you know where you are. It is incredibly easy today to get a full snapshot of your finances at any time thanks to technology. Apps communicate directly and securely with banks, so you all you need to do is check your phone to see where you stand. The app adds your bank balances and subtracts your debt, and the result is your financial net worth.

And beyond your net worth, you need to know how that changes over time, so you track your income and expenses, too. Today, I use Personal Capital and Quicken.

4. I started saving for the future.

It wasn’t enough to have a bank account whose balance was increasing every month. My new job offered a retirement plan with a matching contribution. Always say yes to a matching contribution. It’s free money.

How do you know when you’re financially stable?

To be considered financially stable — a true sign of adulting — you must meet these criteria.

  • You must be spending less than you’re earning. It doesn’t matter which side of the equation you try to improve, but it helps to focus on both your expenses and your income. You can only cut your expenses back so far — but income potential is unlimited. When you spend less than you earn, you have a surplus. The surplus allows you to have some control.
    • Living paycheck-to-paycheck — spending every penny you earn — means you have no surplus and you are not moving towards flexibility or control.
  • You don’t have to be debt-free, but you must be paying down your debt and not accumulating any more. If you’re able to make your minimum payments on your debt and then some, you’re in good shape.
  • You’re not relying on loans or gifts from family. This is the cornerstone of stability. You can make it on your own, just with your income and your expenses. It’s true that you may be in financial trouble if your income disappears, especially if you’re only beginning to establish savings, but for now, you are making it on your own.
  • You are building your future through savings and investment. Your nest egg might not be too big just yet, but it’s growing. You’re putting aside extra money to create an emergency fund and you have a systematic transfer to an investment account, preferably a low-cost index mutual fund.
  • Your friends support your goals. Don’t waste time around people who give you a hard time for being responsible. Often, when one starts acting more grown-up, the friends still wading through adolescence grow bitter. Or maybe you’re the last one to cross the threshold into actual adulthood.
    • People reach this point at different times in their lives. I wasn’t financially adulting until I was in my late twenties. Some start when they’re 40. And I’ve seen some sixteen-year-olds who are taking control of their future I never would have considered.
  • You’re moving forward steadily in your career. How you progress is often up to you, even when are faced with resistance was you’re trying to gain more responsibility, authority, and compensation at your job. You do know that often you have to accept more responsibilities before being granted more authority and increases in compensation. This type of success proceeds at different speeds, but you should always be aware of where you stand, and you make decisions that move you forward.
  • You have health insurance and you take care of yourself. Your health and well-being affect your ability to have a life of any sort in the future, so you watch your health and have an appropriate health insurance plan. You see a doctor once every one or two years, at least, if you’re otherwise healthy, and you see a dentist and dental hygienist every six months. If you need work, you get it done.
  • You pay your credit card balance in full every month. Credit cards can be great tools for people who are financially stable. They allow you to time-shift your spending, just like the DVR time-shifts The Walking Dead. They allow you to collect cash back and points that can be used for travel. But only if you avoid interest charges, late payments, and pay your balance in full every month.
    • This could be considered an “advanced technique,” and many people start messing with credit cards before they are prepared to handle the responsibilities. So watch out.

Financial independence is the next step after financial stability, but it could take a lifetime to achieve. Imagine if you no longer had to rely on your job. Imagine if you could live the life that you wanted to live, go where in the world that you wanted to go, and do anything that you wanted to do — without any concern about what the financial consequences would be.

That is financial independence. And you can’t get there without financial stability first.

Are you financially stable? If so, when did you finally achieve it?

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You need an emergency fund. For reals. Here’s how to get started and where to put it. Read More...

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If you had to come up with $500 for a car repair or a new appliance, could you get the money? What happens if you lose your job? It’s guaranteed that every adult will face some sort of emergency.

Most Americans can’t handle that, so they turn to credit cards and other debt to help when life throws them curveballs.

Don’t be one of them. Get ready for an unexpected setback by building an emergency fund designed to provide you with what you need in a pinch.


  • What is an emergency fund, and why do you need one?
  • How much should be in your fund?
  • Where should you keep your emergency fund?
  • All-cash funds vs. keeping it elsewhere.
  • How to set up a tiered fund.
  • Tips for starting your emergency fund.
  • Characteristics of a good emergency fund.
  • Do credit cards have a place in an emergency?

Listen for our “do-nows” for specific actions you can take right now to begin building your emergency savings. We’ll also answer a listener question about how to free up money even when you’re sure you don’t have any available.

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CNBCAmericans without emergency savings
BankrateAmericans don’t have emergency savings
FPA - Financial Planning AssociationAll cash may not be the best choice
Hosted byHarlan Landes and Miranda Marquit
Edited and mixed bySteve Stewart

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