You've reset your budget. Now what?

The pandemic has pushed many to spend less and save more, and the importance of managing those savings moving forward is clearer than ever. 
 

Many are beginning to shift from the "save as you go" mindset of the pre-COVID era to more of an investor mindset—with a renewed emphasis on value and return. Taking nothing for granted, people want their money to work harder and smarter. 
 

For today’s motivated saver, we sat down with Zach Ciampa, Financial Planner for John Hancock Advice, to put together a checklist to help make your savings count more, and start investing toward long-term goals.

First things first.

An emergency fund is the first step in any savings plan. If you don’t have one, that should be your focus. Around three to six months of expenses is a good target range.
 

If you have a healthy emergency fund, you can still make that sum work harder by putting it in a high-yield savings or money market account, which can help build your savings over time.

Invest or tackle debt? 

While embracing the power of compound interest can help your money grow, high-interest debt—like unpaid credit card balances—does the exact opposite. The money you use to pay down your debt generally won’t return more if you invest it in the market. A good rule of thumb is to focus on getting rid of that high-interest debt before rushing to invest.
 

That being said, low-interest debt like student loans or a mortgage can be a different story. There may be tax advantages to the interest you pay on the debt, and in some instances, it’s better to keep paying the monthly minimum and invest excess cash into the market.
 

The tipping point between those two forms of debt changes from person to person. A financial professional can help clarify what that magic number is, so you can take the best course of action for you.

Maximize your benefits. 

Now it’s time to support other aspects of your finances if you haven’t already—like taking a closer look at your work benefits and making sure you’re taking full advantage of your employer-sponsored retirement plan. You should contribute at least up to the full match amount.  

Invest toward goals.

Emergency fund? Check. High-interest debt? Gone. Company benefits? Maximized. With more stability and efficiencies to your finances, you now have options and can start focusing on goal-based investing.

The first step is prioritization. If retirement is your focus, that could involve contributing more to your employer-sponsored plan or even adding a personal retirement account like an IRA. If college is a priority, you should weigh the various options that can help like 529 plans, UTMAs/UGMAs or a Coverdell Education Savings account.
 

Index funds, mutual funds and ETFs are also ways to work toward your long or mid-term goals. How you approach risk, however, depends on age and how far out you are from your goal milestone. As with all of these steps, working with an advisor can help identify the best approach to make your hard-earned savings go even further.