Ready to Save? Let’s Prioritize How and Where to Save Your Hard-Earned Dollars

There are innumerable articles encouraging individuals and families to “save more, spend less” and “save early, save often.” These are admirable goals, but these articles often fail to address how to prioritize your savings and where to save. For example, if you put 100% of your annual savings into a retirement account, you may not be able to access those assets until you have reached retirement age without incurring penalties and taxes. You don’t want to rely on your retirement assets to fund an unforeseen housing expense or to cover a short-term gap in income.

Get organized and try using the following framework to prioritize your savings and get started!

  1. Rainy Day Fund – your first priority is to have cash or cash equivalents equal to 3-6 months of expenses in an account that you don’t use regularly for cash flow management. This is your emergency fund that can be accessed for short-term cash needs such as unforeseen car or house repairs, medical expenses, or income replacement.
  2. Health Savings Accounts to Max Employer Matches – your next priority is to fund a health savings account (HSA), if eligible, to max any employer matching contribution. If you have a high-deductible health plan (in 2022, for a family this means deductible of at least $2,800 and max out of pocket of $14,100), you can contribute pre-tax dollars to an HSA. HSAs offer triple tax savings: money contributed is pre-tax, growth is tax-deferred and the assets are tax-free upon withdrawal if used for health care costs.
  3. Retirement Accounts to Max Employer Matches – many employers offer matching contributions to your company retirement plan. You should always contribute pre-tax dollars to your retirement plan (401(k), 403(b), etc.) up to the amount required to receive your employer’s matching contribution – never turn down free money!
  4. Extra Payments on Higher Interest Loans – if you have a rainy-day fund and have taken advantage of your employer’s matching contributions, then you are ready to tackle high interest rate debt. Start with extra payments to the highest interest loans that you have.
  5. Health Savings Accounts – now it is time to max your HSA contribution for the year – in 2022, this is up to $7,300 (plus another $1,000 if you are 55+) in pre-tax dollars for a family. The benefit of an HSA is that you can withdraw funds from it at any time to pay for medical expenses.
  6. Retirement Accounts – the old adage is “always pay yourself first.” The IRS allows you to contribute up to $20,500 in 2022 (plus another $6,500 if you are 50+) pre-tax to your company retirement plan. If you don’t have a company retirement plan, reach out to your financial advisor to explore other retirement savings vehicles.
  7. Additional Payments on Interest Loans – now that you have paid yourself first, it is time to start paying off your debtors. After making the minimum monthly debt repayments, start paying off the highest interest rate debt first. And before spending more, ask yourself if the item or experience is a need, want or nice to have, and how long it will take you to pay for that item or experience.
  8. Education Accounts – if your cash flow can support it, set a monthly contribution rate to a 529 education savings account for your child and start saving for future education expenses. Even if you start with smaller contributions, the earlier you start, the more tax-deferred, compound growth will occur.
  9. Taxable Accounts – if you have extra cash flow, open up a taxable account and start investing some of those extra dollars. You can also use this account to save for future planned and/or unforeseen expenses such as a child’s wedding or a new roof.
  10. After-Tax Contributions to Individual Retirement Accounts – some company retirement plans allow for after-tax contributions IN ADDITION to your pre-tax contributions. After-tax contributions can be converted using an in-plan Roth IRA or rolled to a Roth IRA at retirement. A Roth IRA offers tax-free treatment for the rest of your life. This is powerful and is hard to replicate elsewhere.


The key to savings is to make sure that you and your partner agree on the goal for the money. That goal will determine the right savings vehicle to use to maximize flexibility and minimize the tax impact. We can partner with you to help you identify your savings goals, make a plan to achieve those goals, and implement the plan for you.

Kerry B. Connell, CFP®

Kerry joined HTG in 2014. She helps clients create a picture of their financial goals and directs investments to attain those goals. Kerry is also involved in the firm’s management and strategic planning initiatives and contributes to HTG’s educational and networking efforts.

Kerry is a CERTIFIED FINANCIAL PLANNER™ practitioner. She has a BA degree from Tufts University and an MBA/JD from Northwestern University.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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