Financial Planning – 30 & Under

-By Caitlin Koppelman
While I was in college, people told me I had fewer obligations and more financial flexibility than I’d have in my entire life. I could not comprehend that at the time. In retrospect, I can see it now:  No mortgage, no kids, and those blessed student loans were still in deferment!  Life was so simple: almost no liabilities and a high percentage of discretionary income. Now, I have to remind myself that I’m in the “accumulation phase” of life. I’m accumulating valuable assets for the future: an education, our first home and starting a retirement savings plan. Those assets aren’t cheap, but I’m making an investment for the future. Every mortgage payment and every retirement contribution is like money in a future bank account.

Even though it’s natural to want to pay more attention to your present bank account, now is the time to make deposits for that far off phase of life. Do it now, while it’s easier than ever. Notice I said, “easier” not “easy”. It is never easy to delay gratification, but if we want to reap the benefits at harvest time, we have to sow and tend the garden along the way. With 35+ years on your side, a little bit now can multiply if handled wisely.

Who has time to tend that financial garden? There are only so many hours in the week and who wants to spend their down time planning a future retirement that they can barely imagine?  As a 28-year-old, I can’t blame you for being skeptical. You’re probably a little jaded by the whole idea of savings, debt, and retirement. It comes down to risk and reward. If a Traverse City cherry farmer is hopeful for a good crop, he faces the risk of frost, pests and drought, head on. It’s worth the risk for him because of the potential reward. His potential reward is higher because he took the risk and planted the trees. For me, I’m not willing to live a life of limited influence in the future because of financial constraints. So, I plant now and plan for a harvest.

Here are a few simple steps to get you started:

  1. Many employers offer 401(k) matching programs. Take full advantage of that by deferring at least the percentage at which the company will match your contribution. That’s free money! If your employer doesn’t offer a match, at least do your own contributing.
  2. Connect with a financial adviser you trust. Be brave and share your goals. Take advantage of their expertise. You’re a professional with your own expertise in a specific area. Let them use their wisdom and experience to set you free to focus on the things you care about.
  3. After you’ve made a trustworthy connection, make a plan and stick to it! Come flood or draught; keep your eye on the prize!

Remember, delayed gratification is not natural. When something threatens your cherry trees, you’ll be tempted to give up. Stay the course! The harvest is coming!

Financial Planning

-By Scott Blakemore
What comes to mind when you think of “Financial Planning”? 

When asked what I do for a living, my response, “I’m a financial planner” is usually met with blank stares and the sound of crickets.  Now and then I get a response, “Oh, I’ve done that”, “I have an annuity,” or “I have an IRA”.  If only that was all it takes.

In the next few paragraphs, we’ll address three common perspectives regarding “Financial Planning” that many people share and how it affects their planning decisions.

I don’t understand enough to know where to begin.  We hear this one often (both from clients and potential clients).  They apologize for not knowing enough about their investments, pension plans, social security, health or insurance benefits. 

Here is the good news: planners realize you have likely never been taught, nor do you probably want to learn about all the components of your financial situation.  I don’t want to be a nurse or doctor, and when I go to the doctor, I don’t apologize for not knowing how to take my blood pressure.  I am not trained in this, and they don’t expect me to know.  I just want to know if my blood pressure is good or bad, and what to do to correct the problem.  The same is true for a financial planner – you don’t have to know it all, but you do need to know who can help.

Financial planning is inflexible and limiting.  Rarely does someone verbalize this concern, but when asked if they perceive this to be true, their eyes get wide and they nod their head in agreement.

How many Fortune 500 companies have business or marketing plans, sales forecasts, or budgets?  Probably all of them.  How many change their plans the following year?  Probably all of them.  Maybe they aren’t big wholesale changes, but as information comes in and circumstances change, they change.  The same is true for your financial plan – a good plan is flexible and changes over time as you do.

I have a 401k, IRA or Roth IRA.  I own an annuity, stock or bond.  I’m all set.  While various products and retirement plans are definitely components to be used appropriately when constructing a plan, they are not a financial plan in and of themselves.  Does owning a bat make you a baseball player or owning golf clubs make you a golfer?  Having the right equipment is important, but if you want to be successful, you need a coach – someone to teach you and help develop your skills.  The same is true for a financial planner, we will help you learn the game, coach you and use the appropriate tools.

At its root, financial planning is mostly about trust in the person helping you.  Remember, you aren’t required to understand everything, your plan can flex with you, and there’s much more to a financial plan than the components you use.  Find someone who will listen to you and help you ask the right questions … that is the best, first step toward a more solid financial future.

How much money should I save for retirement?

The obvious answer is, as much as you can. You’ll probably need to build a fund that you can draw on for much of your retirement income. This may be possible to do if you start early and make smart choices.

Contribute as much as you can to tax-advantaged savings vehicles (e.g., 401(k)s, IRAs, annuities). Make sure to contribute as much as necessary to get any employer matching contribution–it’s essentially free money. Then round out your retirement portfolio with other taxable investments (e.g., stocks, bonds, mutual funds*). As you’re planning and saving, keep in mind that you may have 30 or more years of retirement to fund. So, you may need an even bigger nest egg than you think.

*Note:   All investing involves risk, including the possible loss of principal. Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.

Your particular circumstances will determine how much money you should save for retirement. Maybe you have a pension plan, or your Social Security benefits will be large enough to tide you over. If so, you may not need to save as much as other people. But other personal factors will enter the picture, too. If you plan to retire early (e.g., age 50 or 55), you’ll have even more retirement years to fund and may need more retirement assets than someone who plans to work until age 65 or 70. Conversely, you may need fewer assets if you plan on working part-time during retirement.

Your projected expenses during retirement will also help determine how much money you’ll need and how much you need to save to get there. Certain costs (e.g., food, utilities, insurance) will be shared by almost all retirees. But you may still be saddled with retirement expenses that many retirees no longer have (e.g., mortgage payments or a child’s tuition).

Expenses will also depend on the type of retirement lifestyle you want. How many nights a week will you dine out? How much traveling will you do? These kinds of questions will give you a better idea of how much money you’ll be spending once you retire. In general, the greater your anticipated retirement expenses, the more you need to save each year to meet those expenses.

Content prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

1 3 4 5
Call Now Buttoncall us now