In our busy lives, it is not uncommon to put off for tomorrow the things we do not have time for today. This is especially true for things that make us uncomfortable or require significant time and effort to squeeze into our already hectic schedules. However, by sweeping these issues under the rug, you are essentially losing valuable time you can spend to improve your circumstances, not just today but far into the future.
When planning for long-term financial security, both men and women find it difficult to know where to start. Should they begin by paying down debt or building an emergency fund? Should they save for retirement before or after a child’s college education? While no one answer will apply to every individual equally, the one rule that always proves true is that the sooner you address these financial issues, the sooner you can create a step-by-step plan and begin adapting new habits to help you achieve your financial goals.
Step 1: Change your Mindset
Rather than considering all the reasons you do not have time to focus on your finances right now, picture all the things you can do with a little planning and financial discipline. For example, saving for your retirement will allow you the freedom to enjoy your golden years with friends, traveling or playing on the golf course or tennis courts. Building an emergency fund will enable you to afford a much-needed new roof or another extensive home repair without putting a dent in your monthly budget or sacrificing your lifestyle. When planning for your long-term financial security, start small. Set goals for yourself and your family, share them with your loved ones and map out a plan you can stick to.
Step 2: Pay Yourself First
Whether you are looking to increase your build an emergency fund or accumulate assets for your retirement, you must begin by making a habit of paying yourself first. This means you put aside a small amount of your paycheck each pay period and slowly readjust your budget to increase the amount you save over time. Once you decide on the amount you can afford to save at the current time, set up an automatic transfer of funds to your savings account every time a paycheck is deposited into your checking account. Not only will you begin accumulating savings for a big purchase, such as a new car or vacation, but you will also build an emergency fund to help you pay for all of life’s unplanned expenses, such as car repairs, medical bills, etc.
One of the easiest ways to begin saving for your long-term retirement needs is to participate in your employer’s 401(k) retirement savings plan and automatically defer a portion of your wages to that account. Again, you can start small, saving less than 10 percent of your wages and work your way up to more significant contributions as your pay increases. Two important benefits of saving through a 401(k) plan are that 1) your contributions reduce your taxable income in the years of funding, and 2) your contributed amounts can grow significantly thanks to compounding interest and market gains.
Step 3: Address your Debt to Find Flexible Dollars
Credit card debt and the accompanying interest on unpaid balances can devastate even the most well-thought-out financial plan. The sooner you pay off your debt, the more flexible dollars you can find in your budget to allocate toward your savings goals.
Get started by putting away your credit card until you can make a dent in your debt. Evaluate your spending habits against your budget of must-have required expenses and work toward eliminating non-essential purchases until you can begin to whittle down your credit card balance and alleviate much of your financial stress.
Step 4: Put Your Plan into Action Â
Working with financial advisors is one of the best ways to assess your current financial picture and develop a plan for achieving your longer-term retirement and estate planning goals. These seasoned professionals can help you quantify your financial commitments in retirement and determine what you will need to begin saving now to live comfortably in the future, based on your projected Social Security benefits and a conservative 4 to 5 percent rate of withdrawal from your retirement savings.
About the Author: Olga Ismail is the head of Retirement Plan Consulting and a financial advisor with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. She can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301Â (954) 712-8888.
Olga Ismail is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Future investment performance cannot be guaranteed. Matching contributions from your employer may be subject to a vesting schedule, please review your retirement plan documents or consult with a financial professional for more information.
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Posted on May 8, 2024