Put your Finances on GPS and Auto-Pilot!
One of the reasons saving and investing feels so difficult and stressful for many people is because they do not have the support to do it while managing full, busy lives.
I am going to share some tips that will help you.
- Get a financial advisor you can trust who can do the heavy lifting. They can be your GPS, guiding you towards your goals. You do not have to learn everything about saving and investing if you hire someone who is knowledgeable and trustworthy. In most cases, the benefits outweigh the costs. People who work with financial advisors tend to not panic and pull out when the market gets volatile as much as people who go at it alone. As a result, they tend to have higher returns over time. It’s about the client’s behavior as much as the advisor’s expertise. The relationship has an impact.
- Build an emergency fund of at least $2,800. Recent studies show that this is the minimum needed for most families to avoid serious financial hardships if there is a surprise expense or temporary job loss. To accomplish this, identify how much you can contribute weekly or monthly without compromising your ability to support yourself now. Then set up automatic transfers from checking to savings. Once you have accomplished your goal, try to increase this to 3-6 months of living expenses (not 3-6 months of salary). Once you have your emergency funds built, work on maximizing your investments. If you have an emergency and use your savings, then repeat step 1 until it is rebuilt.
- If you have an employer-sponsored retirement plan, at least contribute enough to get the matching funds. Then, gradually increase your payroll deductions until you are maxing out the plan annually. An easy way to accomplish the max is to direct part of every raise you get into your retirement plan. So, if you get a 3% raise, send 1% to your retirement plan. If you have debt, send 1% to debt payoff. And keep 1% for current living expenses. If you have student debt, or are still creating an emergency fund, then talk with your advisor about priorities. Maxing out the retirement plan may need to be postponed.
- If you do NOT have an employer-sponsored retirement plan, you can still save for retirement. Small business owners can do a Solo 401K or a SEP-IRA (max of $56,000 annual contribution) or a SIMPLE IRA (max of $13-$16,000 per year). Non-business owners can create an IRA or Roth IRA (max of $6-7,000 per year). All of these can be set up with automatic contributions via online bill pay or bank drafts. Other than the 401k, most accounts are simple and inexpensive to start.
As you set up accounts, be sure to create online logins for them. LifePlan Financial Advisors, Inc. provides a free personal financial website for each client that shows a snapshot of savings, investments, debt, insurance, income and expenses. The balances are updated every night. With this tool, any family can easily have a monthly “state of the family finances” meeting and a quarterly, “how are our investments and saving doing?” meeting to stay well-informed. Overlay this tool with a couple of reviews per year with your financial advisor, and you’re set to go.
If you would like to talk about this further, call Gwen 678-364-9677 or Sibyl (770) 283-9574 or go online at www.lifeplanfin.com and schedule a free visit today.
Gwen and Sibyl