October is Financial Planning Month, so it’s a great time to review your saving strategy. If money talk stresses you out, you’re not alone. 73% of individuals report finances as their top source of stress, according to CreditWise. Additionally, 28% of Americans have less than $1,000 in personal savings and investments. Financial literacy isn’t commonly taught in schools, therefore many people enter adulthood with little knowledge on building wealth. 

Whether you’re starting your savings from square one or already have a good foundation, becoming familiar with these general concepts can help you become a more efficient saver. Money is a very personal matter, so it’s important to evaluate your situation and decide what makes the most sense for you. Even if you can’t implement these strategies now, you can make a plan for the future or adjust them to suit your needs.

order of operations for saving

Make your money work for you. Having a high savings rate is wonderful, but if you keep that money in a traditional savings account with a low APY and don't contribute to an employer-matched retirement plan, you’re leaving money on the table.

The first step will vary depending on where you’re at in your financial planning. If you’re currently in a position where you’d struggle with an unexpected car repair or medical bill, it’s a good idea to start by building an emergency fund. Work on saving at least $1,000 and keep this in an accessible account that earns more than a traditional savings, such as a high yield savings or money market account. Many financial experts recommend having a couple months worth of expenses saved in case you find yourself in between jobs or a more costly emergency arises. You can continue building your emergency fund to your comfort level in conjunction with the other steps. 

The chart below from Bogleheads is a basic order of operations that will be particularly helpful for those in the beginning stages of maximizing funds.

the different types of retirement accounts

Now that you have a general idea on where to start, let’s talk retirement accounts. As you can see from the order of operations, there’s quite an emphasis on leveraging these types of accounts, so it’s important to understand the differences. This isn’t an exhaustive list as there are many different retirement plans, but here are some of the most common types.

401(k): This is an employer-sponsored contribution plan that typically comes with a partial match from your employer. Contributions come out of your paycheck before taxes, so it offers a tax break in addition to tax-deferred growth. You generally can’t withdraw from these plans until age 59.5 without being subject to a 10% penalty, though some plans have hardship options. The reason a 401(k) is a top priority is because you should be contributing at least enough to get your full employer match, otherwise you’re passing on money that’s (literally!) free. For 2025, employees can defer up to $23,500 per year, with additional catch-up contributions for employees over 50 years old.

403(b): These accounts operate in the same way as a 401(k). They are tax-advantaged, often come with an employer match, and have the same annual IRS contribution limits. A 401(k) is offered to employees at for-profit companies while a 403(b) is offered to employees of public schools, churches, and 501(c)(3) non-profit organizations. 403(b) accounts may also have additional opportunities for catch-up contributions after 15 years of employment.

Traditional IRA: Individual retirement accounts (IRAs) are personal retirement accounts. Contributions to a traditional IRA are pre-tax as the contributions reduce your taxable income. Taxes are paid when you withdraw the money beginning at age 59.5. If you withdraw before this age, you could be subject to penalties and additional taxes. The 2025 annual contribution limit is 7,000, or 8,000 if 50 or older.

Roth IRA: Roth IRAs do not have the pre-tax advantages of the other retirement accounts we’ve discussed. The benefits of a Roth IRA are that they have more liquidity and grow tax-free. You contribute after-tax dollars and the contributions and earnings can be withdrawn tax-free after age 59.5, as long as the account has been open for at least 5 years. You can withdraw your contributions at any time without being taxed. Earnings that are withdrawn before 59.5 are subject to taxes. Roth IRAs have income limits, so make sure you are eligible before making contributions. The 2025 contribution limit is the same as a traditional IRA: $7,000 per year, or $8,000 for those 50 and older. These limits apply to all of your IRA accounts. For example, if you contribute $5,000 to your traditional IRA and $2,000 to your Roth IRA, you have hit the max contribution limit for these types of accounts.

Roth 401(k): Roth is a descriptor of how the retirement funds are taxed. As we discussed with the Roth IRA, a Roth 401(k) also uses post-tax dollars for contributions and earnings grow tax-free as long as withdrawals are made after age 59.5. There are a few key differences between a Roth IRA and Roth 401(k). The 401(k) is employer-sponsored (therefore, likely comes with an employer match) and there are no formal income limits, though individual plans may set limits for highly compensated employees. Another difference is that with the Roth IRA, contributions can be withdrawn at any time without penalty, but this is often not the case with Roth 401(k)s. Plans may have an option for hardship withdrawal, otherwise withdrawals before 59.5 are typically subject to taxes. Roth 401(k)s have the same 2025 annual contributions limits as other 401(k)s: $23,500, and additional catch-up contributions for those 50 and older.

Pension: These plans aren’t as common as they were in the past. They’re more likely to be offered to those in the public sector and/or unions. Money is contributed to a pension fund then employees either receive a lump sum or regular payments for life once retired. Pensions typically have longer vesting schedules than 401(k)s.

Keep in mind that these are the basics. Your employer-sponsored plan will have its own specifications that you should know. Some types of accounts have required minimum distributions when you reach a certain age, while others do not. This is a good jumping off point, but make sure to do further research when funding for retirement.

the pros of a taxable brokerage account

Now that you have an understanding of common retirement accounts, you might be wondering why you’d invest beyond that? Why not invest up to the contribution limits in tax-advantaged accounts then keep the rest of your money where it’s FDIC or NCUA insured? Investing undeniably comes with risk, but there’s a mindset you need to get comfortable with if you’re looking to optimize your assets: if your money isn’t at least keeping pace with inflation, you’re losing money. The purchasing power of your dollar today will not be the same as its purchasing power in the years to come. This is what we mean when we say make your money work for you. 

What if you don’t make enough to hit your retirement account’s contribution limit? Why invest in a taxable account rather than defer as much you can within the limits of a tax-advantaged account? Don’t forget that most retirement plans penalize you for withdrawals prior to age 59.5. If the vast majority of your money is tied up in a retirement account, what happens if you decide to retire early? Or an expense comes up that exceeds your emergency fund? (Read up on the newly updated brackets for long-term capital gains here.)

The one big exception here is with Roth IRAs, which we know can be accessed at any time tax and penalty-free as long as you don’t dip into earnings. Remember that Roth IRAs have income limits and contribution limits are $7,000 per year if under 50. Therefore, funding a Roth IRA over a taxable brokerage may be preferable if you’re eligible and stay within the limits. Otherwise, it’s time to look into a taxable brokerage account to put your excess funds to work.

using credit cards to your advantage

Credit cards, understandably, have a bad rap. They often come with exorbitant interest rates and about 50% of credit cardholders carry a balance from month to month. However, using your credit cards for everyday spending can be a good way to earn cash back, travel points, and other rewards. There’s one major caveat: pay your balances before you get hit with interest. As long as you’re paying in full, you save money when purchasing with a rewards card. 

Security is another significant reason to reach for your credit card over your debit card. Fraudulent activity on a credit card is much easier to resolve than funds stolen from your bank account. Federal law stipulates that consumers cannot be responsible for more than $50 in losses when a credit card is lost or stolen as long as the issuer is notified promptly. You may not be responsible for any charges if you report your loss before your credit card is used. Most credit card networks offer $0 liability protection. Additionally, many credit cards now generate digital cards that hide your real card number when shopping online.

If you’re currently carrying credit card debt or prone to overspending, you might need to limit your usage. However, when used responsibly, credit cards can be a great tool for optimization and protection. 

We want to reiterate one final time that there is no one-size-fits-all when it comes to saving and investing, but we hope this has armed you with some knowledge that you can apply to your own efforts. Make it a productive Financial Planning Month!