(7 minute read)
Finances are a challenge in everyday life. Period. For early savers, investing in retirement often competes with more immediate economic needs like housing, utilities, food, transportation, and other basic necessities. Compound that with results from a 2023 study claiming that 88% of US adults feel underprepared to handle money after high school, and an uneven rollout of personal finance curricula in the United States (including 25 states that don’t require personal finance courses to graduate)1, and it’s not hard to imagine why so many Americans struggle to save and why many of us don’t even know where to start.
The US government provides us with several olive branches through employer retirement plans and IRAs, but if you lack the knowledge about what’s available to you and what’s appropriate for your situation, how are you supposed to make an informed decision without getting lost in the packets of employee benefits and tax law?
As you can imagine, many opt to throw funds into an employer matching retirement plan and hope Social Security will pick up the rest. The hard truth is that many of us haven’t saved enough and are stuck working into our golden years. Are we expected as individuals to “go it alone” and figure out how to plan for retirement while getting lost in all the legal details? Yes and no. In a manner of speaking, we’re all responsible for our own financial outcomes, but you don’t have to do that alone.
No matter where you start this process, there are things you can do to alleviate your concerns about comfortably retiring.
What’s Done is Done
Everyone enters the retirement savings game at their own capacity and comfort. There could be lots of reasons for this: socioeconomics, fear of losing money in the market, or simply the reluctance of tacitly endorsing bad behavior through investment. Certainly, once you overcome these hurdles, you have your own priorities that drive HOW you invest. A lot of us may not be aware, but there are more socially and environmentally conscious businesses to invest in, like B-Corps. At the end of the day, individuals still need to prioritize their earnings and savings, and investments are an advantageous way to grow our savings so we can ultimately stop working.
So, what if you haven’t started your planning? Kicking yourself for not doing this sooner won’t help, but your past informs where you stand today, and that’s what we have to work with. The first major step you take is to collect all of your latest bills and bank statements. If you’re really ambitious, grab all the bills you’ve received from the last year and write them out. This exercise, by itself, sparks more curiosity about other things you spend on, like going out and groceries. Then move to your paystubs and other income like your side business. Are there ways to improve those? You can now ask that question by looking over these numbers without falling into the “I know I need more” trap. We all need more, but how much, and can you reasonably increase your income in your current role without moving to other opportunities?
When is it Time to Act?
Getting a handle on your finances starts with an honest budget. No pencil-whipping or guessing here. We want to take an accounting approach to understand where your budget is, which means no cheating! There are online resources online available, and some banks make budgeting tools available, but I find these somewhat too general. Life is more complex than these tools tend to support, so I suggest finding a financial advisor you can trust to get this process started. Why? Because developing your budget also includes plans for the future, and they are best equipped to guide you to successfully execute those plans.
When you have a handle on your budget, stop the wait and make your move. Opening a retirement account is a good place to start, and if you have an employer plan like a 401(k) that offers a company match, start there. The idea is to use compounding interest to grow your money over time, and if you’re a younger investor, you can take on more risk for a higher expected return. That’s what’s meant when you hear the phrase “make your money work for you.” With the help of your advisor, you can make informed decisions on your investments so that you don’t have to do this alone. The investing world is complicated, at best, and every advisor has their own opinion about where they think the market will go – myself included. It’s critically important that you find someone you trust!
When you begin working with your advisor, your future plans shouldn’t just cover how you’ll make money. Share how you want to live your life! Do you want kids? Would you like to save for a home (even though the market is wretched)? Are you planning on getting married soon? These are all major life events, and as you progress through life, your situation, priorities, and even your goals will change too. Your advisor wants to know about what’s going on in your life so they can change gears in your plan.
Working the Plan
You should have a productive relationship with your advisor to make sure your goals stay on track. Maintaining this relationship allows them to help you if the situation calls for protecting your assets as you age and plan for giving a legacy to your loved ones when you pass. Remember that these are professionals who put themselves in your shoes with the knowledge they have to craft recommendations. So, when the unexpected happens, your advisor can provide guidance to relieve the burden of decision making, but ultimately the choices are yours to make.
In the advising and planning world, there’s an ideal approach to building a financial plan and maintaining it. But if you found yourself trying to do this by yourself, some things might have been done out of order, and that’s fine! It’s about making your plan more robust, checking in annually and every time there’s a major life event so that your plan is current. Your advisor might be able to connect you to other professionals to assist you in building an estate plan once your financial plan is in place. They may even know reputable accountants, bookkeepers, and other professionals – especially helpful if you own your own business. Advisors are an incredible resource for you as life happens.
Everybody approaches their financial planning at their own pace. Some are able to save right away while others are going through school, taking care of aging parents, being parents themselves, or spending their remaining formative years figuring out who they are and where they want to be. Whatever the case is, you should remember that while now might not be a great time to put savings away for the future, it doesn’t mean you’ll never be able to. Obviously, the best time to save is as early as possible, but the next best time is when you’re ready to.
Schedule a Consultation
Schedule a free consultation with me at Morgan Financial Associates, LLC, to start planning your financial future. From retirement to life insurance to college savings and more, we can help you establish a plan that works for you and your family, no matter how small or large.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only.
- Report Summary, December 15th, 2023 at Ramsey