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Author: Hillary Mitchell

How to Start an Emergency Fund

Posted on by Hillary Mitchell

An emergency fund is a safety net. While we hope to never fall, it’s there to catch us when life’s unexpected challenges arise. An emergency fund provides a comfortable cushion for your family during a crisis and is the foundation of any financial plan. Here we’ll answer all your questions about where, when, why, and how to start an emergency fund.

Why should I have an emergency fund?  

We can all think of countless “life happens” scenarios in which we incur unexpected expenses. Some may be life-changing (like the loss of a job), while others may be relatively minor annoyances (like dropping your cell phone in the bathtub). The key takeaway is that crises are a part of life for everyone. Having an emergency fund gives you peace of mind, knowing that when the unexpected happens, you’ll be prepared to handle it. 

Having a comfortable emergency fund in place also helps you avoid racking up credit card debt to pay for an unexpected expense or cover a period of lost income. This is especially important if you already carry debt.   

How much money should I keep in my emergency fund?  

We recommend keeping 3-6 months’ worth of your fixed expenses in an emergency fund. Target three months of expenses if you are a dual-income household. Err on the side of six months of expenses if you are a one-income household. You’ll also want to target six months if you are a business owner, and your income is variable or unpredictable.   

Looking at your monthly fixed expenses will help you set a goal and start saving towards that goal. Some websites offer online calculators to help you determine your target amount for your emergency fund.   

How do I start an emergency fund?  

Starting an emergency fund is like any other savings goal: Decide your target amount, then strategize how to get there. Consider a variety of saving strategies, such as directing one-time income (like a holiday gift or tax refund) toward your emergency fund, setting up automatic contributions from your checking account to your emergency account, or establishing a habit of saving on a routine basis.   

Where do I keep my emergency fund savings?  

You have a few options as to where to keep your emergency fund:   

Cash

We’ve all heard the stereotypical “cash in the mattress” anecdote. And some people do like to keep their emergency fund in cash in their homes. While you do have very immediate access to your fund—a benefit for some people—there is no opportunity for your money to grow and it isn’t as secure as it would be in a bank or investment account.

Bank account

Keeping your emergency fund in a checking or savings account offers easy access through a debit card or to pay off your credit card, but it typically earns little to no interest.

High-yield savings account

This is generally where we recommend our clients keep their emergency fund. A high-yield savings account is an FDIC-insured savings account offered through an online bank. The funds take 1-2 business days to transfer to your checking account, with some banks even offering same-day transfers. You will be paid interest by the bank on your balance, and it will be much higher than what a traditional brick-and-mortar bank would pay.

Conservative investment account

“Conservative” in this sense means the account is more heavily allocated towards bonds than it is stocks. With this setup, the account is invested, and it can lose value, even with the conservative allocation. The funds will take 4-5 business days, on average, to reach your checking account in the event you ever need money. However, the market can reward you, and this offers the highest growth potential of all the emergency fund options.

When should I start my emergency fund?  

There’s no time like the present! Having an emergency fund is the first step in any prudent financial plan. Having the cash to cover emergency expenses provides peace of mind while you work towards bigger financial goals.

If you want help budgeting for emergency savings, setting up an emergency fund, or simply getting started with a personalized financial plan, our team at Commas can help.

Financial New Year’s Resolutions: 10 Goals for 2025

Posted on by Hillary Mitchell

The clean slate of a new year often comes with fresh motivation to meet our goals—whether that means reading more, getting in shape, or spending more quality time with loved ones. For some, these goals revolve around a particularly stressful topic: finances. While setting financial new year’s resolutions can feel daunting and complicated, the long-term return and peace of mind is well worth the effort.

To get you started, we’ve compiled a few tips from our team to reduce mental stress and help your financial life run like a well-oiled machine this year. Here are ten financial new year’s resolutions for your 2025:

Get better at budgeting. 

The key to budgeting is tracking and understanding your spending habits. Once you understand your habits, you can make incremental changes to meet your goals. When doubt, use the 50-30-20 rule. That is, you should allocate 50% of your budget to essentials, 30% for discretionary expenses, and 20% to savings.   

Max out your 401K contributions. 

While this is easier said than done, we recommend prioritizing these contributions as much as you’re able. At a minimum, you want to be contributing enough to get the full match from your employer. If possible, try to max out your 401k or employer plan at the annual limit ($23,500 for 2025).   

Automate your savings. 

Set up your accounts so that part of your paycheck automatically goes to a savings or investment account before you have a chance to spend it. You might also consider setting up different savings accounts for different goals. For example, an emergency fund account (which should be a top priority) can be separate from your vacation planning account.   

Update your estate plan and will. 

Ensuring your estate plan and will are up-to-date relieves the burden of making difficult decisions in a crisis. If estate planning feels overwhelming, don’t worry. Your Commas advisor can help you get connected to the right resources and ensure you have beneficiaries where appropriate. In the meantime, start small by creating a list of your personal and financial information and accounts, as well as your passwords, and put them all in a secure place.  

Pay attention to what conversations you have about finances. 

Every household’s approach to their finances is different. Whether you manage your finances individually or have shared accounts with another person (or people, if you have children), identifying the culture around money in your home can be a good early step in decreasing stress and finding financial peace of mind.  

Try asking yourself these questions:

  • What truly matters most to me, and how well do my financial decisions support those priorities? 
  • How do I/we make decisions about spending, saving, and giving, and what does that reveal about my/our shared priorities and values? 
  • Do we have open and honest conversations about money, or is it a source of tension in our home? 

For parents: 

If you do have younger children, you might consider using an app like Greenlight to offer an allowance and help them start understanding financial basics like spending, saving, and giving. Getting started young allows your kids to make (and learn from) financial mistakes while the stakes are still low, in a safe environment.  

If your children are teenagers or young adults and require less supervision, conversations will shift to managing money earned at a job, saving for college, or filing taxes. Talking about money with kids of any age shows you’re comfortable discussing finances with them—and opens the door for them to come to you with financial questions.   

Read (or listen to) a great book. 

Use some time this year to explore literature on financial management, investing, and market history. We particularly recommend The Investment Answer, The Opposite of Spoiled, The Psychology of Money, and The Millionaire Next Door.  

Track all your charitable giving. 

With some smart planning, you can increase your charitable giving by using available tax benefits. By taking time to educate yourself on the benefits of charitable giving, you can gift more by gifting smarter.  

Don’t let the content stream overwhelm you. 

With an incredible amount of content and current events coverage more accessible than ever, it’s often difficult to keep panic—or, at least, a constant sense of anxiety—at bay. Today’s financial news might seem urgent, and the markets may fall, but it’s the long-term view that matters most when it comes to investing. We know the markets reward discipline and resilience. Before you act on what you come across on your newsfeed, take a step back and refocus on your end goal.  

Don’t wait until April to do your tax planning. 

Rather than waiting until the last minute to scrounge up paperwork, spend some time thinking ahead about what you’ll need to file your taxes. This mindset may also end up saving you money, as some tax benefits can be gained by taking certain actions prior to December 31.  

Add this bonus financial new year’s resolution: create a file system (if you don’t already have one) to keep your tax paperwork handy throughout the year, especially if you work for yourself or run a business. 

Connect with a financial advisor. 

Financial advisors aren’t just for soon-to-be retirees. In fact, if you’re in the early or middle stages of your career, a relationship with a trusted financial advisor can make a significant difference to your future by helping you circumvent commonly made mistakes and stay on track with your goals. 

Having an experienced professional who can take an objective view of your financial situation and guide you through complicated financial decisions like major purchases, long-term savings, or equity compensation elections can help you make the most of your wealth accumulation years—and provide peace of mind along the way.  

If you have found yourself setting a goal to ‘get your finances in order’ for another consecutive year, it may be a good time to talk with a professional! At Commas, we love to work with people who are motivated to make the most of their income—even if they’re not sure where to start. If that sounds like you, we can help. Let’s talk. 

What You Need to Know About Student Loan Repayments

Posted on by Hillary Mitchell

Student loan forgiveness has been struck down by the Supreme Court. 

President Biden’s original plan to forgive up to $20,000 for eligible borrowers has officially been struck down by the Supreme Court. Even if you applied back in the fall of 2022 and your application was approved, you will not have your loans forgiven.  

Loan repayments are set to restart in October.

Student loan monthly payments have been on pause since March 2020; during that pause, no interest has been accruing. Student loan forbearance has been extended a number of times, but now interest will begin to accrue on September 1st, 2023 and monthly payments are set to begin in October 2023.  

The Department of Education is also instituting a 12-month “on-ramp” for borrowers. This 12-month period, from October 1, 2023, to September 30, 2024, is to protect borrowers who miss monthly payments. Borrowers who miss a payment during this period will not be reported to credit bureaus, placed in default, sent to collections, or even considered delinquent. 

A new repayment plan is now available to borrowers.

A new income-driven repayment plan will be available to borrowers. This plan stands to be the most affordable repayment plan ever created. The plan is called Saving on a Valuable Education (SAVE) and it will be replacing the Revised Pay-As-You-Earn (REPAYE) plan. To get on the SAVE plan you need to apply for an Income-driven repayment (IDR) plan and select REPAYE. Since SAVE is not currently available, you will apply to be on REPAYE and your plan will automatically switch to SAVE once it becomes available and REPAYE is phased out. The SAVE plan should be available later this summer. 

Highlights of the plan include: 

  • Cutting the payment amount from 10% of discretionary income to 5% 
  • Increasing the amount non-discretionary income from 150% of federal poverty levels to 225% 
  • Opportunities to have loans forgiven between 10-20 years 
  • Interest will not capitalize on the loan if monthly payments are made, meaning your loan balance will not grow over time 
  • Ability to exclude a spouse’s income if you file your taxes separately 

Your Next Steps 

If you’re already on an IDR plan… 
  • Log in to StudentAid.gov and go to your My Aid page, scroll down, and view your loans. Each loan will list a repayment plan. If you see that you are in the REPAYE Plan, that means you’ll automatically be enrolled in the SAVE Plan later this summer. If you’re on a different repayment plan, you’ll need to switch into REPAYE now.
If you’re not on an IDR plan… 
  • You’ll need to go to StudentAid.gov and apply for an Income-Driven Repayment plan. There are 4 different plans to choose from and an estimator for which will give you the lowest monthly payment 
Recertify your income. 
  • All borrowers will need to recertify their income, but not necessarily right away. Each servicer has a different timeline for when they will start recertifying incomes for borrowers; most servicers will resume in December 2023. If you have FFEL loans, you should stick to your normal recertification schedule.  
Determine which repayment plan you should be on. 
  • This depends on your situation and what each plan has for your monthly payment. The new SAVE plan seems promising, and we anticipate many borrowers moving forward with it, as it should have the lowest monthly payment.  
Get ready to start paying on your loans again. 
  • It’s been over 3 years since student loan payments have been required. In that time, a lot of Americans have bought houses, cars, picked up new hobbies, etc. It’s time to go back to your budget and make sure you’re able to make your loan payments on time and in full.  

Ultimately, we recommend that borrowers consider enrolling in the SAVE plan—which offers a great opportunity for eligible borrowers to save a lot of money on their student loan repayments—and suggest that most borrowers not take advantage of the 12-month “on-ramp.” Student loans have been a hot political topic for the last several years resulting in a number of unfulfilled promises. While frustrating, we don’t recommend missing your loan payments or waiting until October 2024 to begin repaying based on unreliable public discourse.  

Interested in working with a professional to plan for student loan repayment? We’re here to help. Contact our team for more information. 

Tax Guide 2023

Posted on by Hillary Mitchell

Tax season has officially begun! This year, the Commas team has put together a comprehensive guide to help you navigate tax season. This guide includes key tax terms and strategies you should know and helps you answer questions like these:

• Should you do your own taxes or hire a professional?

• What tax documents do you need?

• Where do you find tax documents for your investment accounts?

Click here to download the full PDF of the Commas tax guide. 

The Pros and Cons of High-Yield Savings Accounts

Posted on by Hillary Mitchell

If you’re interested in growing your funds but still want access to them, a high-yield savings account could be the perfect choice. High-yield savings accounts can be a great way to earn more interest and stash away funds so you can meet your short-term savings goals.  

Here, we’ll go over the pros and cons of high-yield savings accounts, and offer our recommendations for getting the most out of these savings vehicles.

What is a High-Yield Savings Account? 

A high-yield savings account (HYSA) is what it sounds like: It’s a savings account that offers account holders higher-than-average yields (or interest rates) on the deposits they make.

Here’s an example:  

You’re interested in opening a savings account with a $1,000 initial deposit, with plans to add $100 monthly. You could open a traditional savings account, with an average interest rate of 0.07%.  Alternatively, you could put your $1,000 in a high-yield savings account, which at the time of the writing of this article, is earning around 3-4%.  

If you open that traditional savings account, over a year, you’d get a little over a dollar in interest. At a rate of 3.5%, the high-yield savings account would earn you just under eighty dollars for that year.  

That may not seem like much. But imagine if you left money in that account for years. Suddenly, those dollars in extra interest can turn into much more. 

What are the Pros of High-Yield Savings Accounts?

In addition to the increased ability to grow your funds through higher interest rates, high-yield savings accounts have many other benefits.  

The pros of high-yield savings accounts include:  

  • The ability to grow your money risk-free (as opposed to an investment, which always comes with some risks).   
  • The peace of mind that your money is insured. High-yield savings accounts tend to be Federal Deposit Insurance Corporation (or FDIC) insured. With this type of insurance, your funds (up to $250,000 per depositor) will always be protected, even if your bank loses money. 
  • The flexibility of liquid funds. Taking your money out of a HYSA shouldn’t result in any penalties, and it should only take a day or two to move your money from a HYSA to other accounts.

Why Should I Open a High-Yield Savings Account?

If you already have several financial products to your name—a checking account, a traditional savings account, or an individual retirement account— you may wonder why adding a HYSA is worth it. Here’s why.  

High-yield savings accounts are good for short-term savings goals. 

While checking and savings accounts are great for managing everyday expenses, and investment accounts are great for long-term asset growth, your HYSA is great for setting aside and growing funds for expenses coming up in one or two years.  

For example, if you’re saving up for a home renovation, gifts, or a long-awaited vacation, it makes sense to put that money aside in a HYSA. Once you need it, you can withdraw it easily; and, until you do, it’ll grow faster than it would in checking or savings.  

Some companies (such as Betterment) allow you to categorize your HYSA cash in “buckets.” This can help you visualize your progress towards your short-term goals as you make deposits in your HYSA. 

Considerations when Weighing the Pros and Cons of High-Yield Savings Accounts

While high-yield savings accounts can be powerful tools to help you reach your short-term savings goals, they may not be for everyone (or for every situation). These aren’t necessarily  ‘cons’ of high-yield savings accounts – but they are good things to keep in mind.  

  • High-yield savings accounts are not best-suited for daily banking purposes. The money you put in a HYSA should stay put so you can start seeing high yields. This means that you will need a checking account in addition to your HYSA.  
  • High-yield savings accounts usually have more requirements than a regular savings account. Your account may have limits on how much you can withdraw or transfer in a certain amount of time or require a higher deposit when you first open the account.  
  • High-yield savings accounts are not the most powerful vehicle for retirement savings. High-yield savings accounts will net you more interest than the average traditional savings account, but they likely won’t grow as well as investing in the market. Having a separate account for your longer-term savings goals will be best.  
  • High-yield savings accounts could be subject to changes in interest rates. Your bank may be able to change the interest rate of your account over time (unlike, say, a CD account). To avoid surprises, ask your bank about how this would work.

Our Recommendations for High-Yield Savings Accounts 

Now that we’ve gone over the pros and cons of high-yield savings accounts, here’s what we’d recommend:

First, work with your financial advisor to find a high-yield savings account with requirements and an interest rate that works for you, and then use it strategically to meet your short-term goals.  Then, move your emergency fund into a HYSA. It’s a great way to increase your financial resilience and earn interest at the same time.  

We usually recommend keeping enough funds to cover 3-6 months of needs (e.g., your rent, car payment, groceries, and insurance payments, not “wants” such as entertainment). If you’re approaching retirement or have a large family, it may be best to work toward a large enough emergency fund to cover one year, if needed.  

Interested in working with a professional to ensure your finances are in the best place possible? The team at Commas is here to help. Contact our team online for more information.