The start of the new year is a time for new beginnings and many are looking for ways to improve their physical and financial well-being. Just as exercise and healthy foods are part of the regimen for physical fitness, savings can help improve financial health, especially in the long term.

Building up your savings may be easier than you think, and there are tax advantages to putting money aside in certain scenarios. The following three strategies can help you take advantage of the savings opportunities available.


To know how much you can afford to save, you first need to know your expenses. Go over a few months’ worth of bank statements to get a sense of where you spend your money. Group your costs into set, variable and personal categories to distinguish between the necessary costs and the costs that can be adjusted.

Ideally, you would be able to put back 20 percent of your monthly income into some form of savings. You should also take a look at your total savings and determine whether you have enough to cover your fixed and variable expenses for three months if you were to suddenly lose a source of income.

Retirement Plans

One of the easiest ways to save is through your retirement plan. If you have an employer-provided plan, make sure that you are at least contributing the percentage that your employer matches. Individuals on the cusp of a higher tax bracket may want to consider making larger contributions because contributions to an employer-sponsored retirement plan are taken out pretax. There are limits to how much you can put back into a retirement plan. Defined benefit (pension) plans are subject to a $220,000 limit in 2018. Defined contribution plans are limited to $55,000. In 2018, 401(k), 403(b) and 457 plans are limited to $18,500.

Individuals without an employer match or employer-provided retirement plan should consider contributing to a Roth IRA. With Roth IRAs, individuals pay the tax on the front end, and their Roth IRA distributions are tax-free.

529 Plans

Another tax-advantaged way to save would be to take advantage of your state’s 529 plan, which helps cover educational costs for your children. There are several types of 529 plans, including college savings plans and prepaid tuition plans, so carefully review which option makes the most sense for your children’s educational goals. Although 529 plans have the advantage of offering pretax contributions, they also typically come with administrative fees. The range of fees will depend on the type of plan selected and whether it’s broker-sold or direct.

Financial management does not have to be a daunting task; the key is to start small and keep it manageable in order to promote less stress and better overall well-being in the long run. 

Jennifer Harris is a director in the Bakersfield office of CBIZ and MHM. She specializes in providing accounting and attest services for a variety of industries, including not-for-profit organizations, employee benefit and retirement plans. The views expressed in this column are her own.