Everyone’s financial situation is unique. Still, it’s important for anyone on their financial wellness journey to have a plan in place with practical steps to maximize their decisions around money. Here are some of our key considerations.

Among the early actions an investor could take, some stand out as priorities that may help establish a more stable path toward achieving financial goals. A few options to get a head start include:

• Taking advantage of employer matching contributions. Don’t pass up a high-value opportunity from your employer, which is a great incentive to save for retirement. Vanguard research found that about 30% of participants enrolled in workplace retirement plans with an employer match did not contribute enough to receive the full match.
• Eliminating high-interest debt. Paying down high-interest debt, such as credit card debt, is typically one of the best places to direct disposable cash flow. In today’s high-rate environment, credit cards with variable interest rates may mean more money out of your pocket if you carry a balance. The highest-returning strategy is to pay down debt in descending interest rate order, also known as the avalanche method.
• Building emergency savings. Planning for the unexpected can turn a potential crisis into a manageable setback. Our research suggests preparing for spending shocks, such as car repairs or a dental procedure, by setting aside at least $2,000, or half a month’s worth of expenses, in cash-like investments such as checking and savings accounts. To prepare for an income shock, such as a job loss, having 3 to 6 months’ worth of expenses saved may be a reasonable starting point. Consider not only cash but also other liquid investments, such as bond or stock funds held in a taxable brokerage, to help support longer-term goals as well.

Given the unexpected nature of spending shocks, checking and savings accounts can help preserve value while supplying the liquidity needed to cover emergency expenses; conservative investments such as money markets within a taxable brokerage account may also be effective.

With income shocks being less likely to occur in comparison, investing in a taxable brokerage account may help support long-term goals. Roth IRAs can be an option as well, to help balance the need for emergency savings while growing retirement savings. Because contributions can be accessed at any time without penalty, an IRA can help support retirement goals while allowing for easy access to funds should an unexpected job loss occur.¹

Investors saving for longer-term goals like retirement or education expenses should seek to maximize use of certain tax-advantaged accounts. Some of the steps investors may consider include:

• Starting long-term retirement planning (if you haven’t already). Harness the investing power of an employer plan, such as a 401(k), along with any available company match. Consider adding an IRA or taxable account that may provide tax advantages and diversify a portfolio. Even during uncertain periods, maintain perspective—the longer money is invested, the more it could compound over time.
• Using a health savings account (HSA). HSAs provide a tax-advantaged way to save for health care costs both today and in the future.² Qualified withdrawals taken for health care costs avoid taxation and penalties, and once account holders reach age 65, HSA funds can be accessed for any use penalty-free.
• Preparing for future education with a 529 plan. 529 savings plans offer investors a tax-advantaged way to save for education, yet over half of Americans are unfamiliar with them, according to a survey by Nebraska’s NEST 529 College Savings Plan. Contributions made to a 529 can be withdrawn tax- and penalty-free, provided the money is used toward higher education expenses.³

Financial priorities can evolve and change, just like life does. Dedicating time to periodically assess one’s financial picture can help ensure an investor stays on course to achieve their desired outcomes.

• In case of emergency, break glass: Managing household liquidity (research paper, issued May 2023)
• What to do with your next dollar: A quantitative framework (research paper, issued March 2023)
• Vanguard’s guide to financial wellness (research paper, issued January 2023)
• Delivering powerful advice