For many young professionals, financial planning can feel daunting. Here are a few ideas that are easy (and may even be offered through your employer). Read on about four things to consider when undertaking your financial planning.
It All Starts With a Budget
For most people, getting their finances in order starts with a budget. Budgeting, or the process of estimating expenses and income over a period of time, will help you identify where you might be spending too much and where you might be able to spend or save more.
While there are many budget templates available, it’s important to take your own financial obligations into consideration. Some questions to ask yourself:
Leverage Multiple Bank Accounts
Saving money can be a challenge. One way to mitigate the urge to spend when you should be saving is to create separate bank accounts to manage different savings goals. For example, if you’re trying to build an emergency fund and save for a car simultaneously, you can create a separate bank account to manage each goal so that you won’t be tempted to dip into those funds for everyday expenses.
If you are paid through direct deposit, you can split your payments across different accounts directly so that you won’t need to worry about transferring the funds yourself. If you’re a Justworks member, we’re excited to announce that you can now split your payments across more than two accounts. We know how valuable it is to be able to “set it and forget it,” so we hope Justworks members take advantage of this capability.
Visit our Help Center to learn more about how to split your payments into multiple bank accounts.
Plan for (un)Expected Health Insurance Costs
Even when they’re planned, health insurance costs can come as a bit of a surprise. If this sounds like something you’ve experienced, it might be time to look into a FSA or HSA. FSAs and HSAs are accounts that can help you pay for qualified out-of-pocket health insurance costs.
An FSA, or Flexible Spending Account, is an employer-owned account that allows employees to use pre-tax dollars throughout the year to pay for qualified out-of-pocket health insurance or dependent insurance expenses, like deductibles, copays, and medications. Your employer must elect to offer an FSA in order for you to be able to utilize this type of account.
An HSA, or Health Savings Account, is similar to an FSA in that it allows you to save pre-tax money to use toward qualified out-of-pocket health insurance costs. However, an HSA is an employee-owned account that is only available for individuals with high deductible health insurance plans.
Plan for Retirement
No matter how old you are, saving for the future is an important consideration. Many employers help their employees do this by offering a 401(k), which allows employees to allocate a certain portion of their earnings to a retirement savings plan. If you are an employee with a company using Justworks, you can check with your administrator on whether your company offers a 401(k) through Justworks. Read more about this benefit in Justworks here.
If your company doesn’t offer a 401(k), you can look into opening an Individual Retirement Account (IRA). IRAs are available through a variety of providers for individuals to open, regardless of their employer.
Finances can feel overwhelming at times. But, by taking a moment to step back and consider your finances holistically you can make progress to reach your goals.
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.