The Top Financial Tips You Need to Know

Are you feeling flummoxed by financial planning? Does a pit form in your stomach at the words “retirement fund,” “college savings,” or “investing in financial markets”? We’re here to answer your financial questions on how to achieve your goals. Our team of dynamic financial experts clears the clouds of intimidation and delivers practical answers, showing that having command of your finances & investment portfolio is attainable.

With the new year quickly approaching, I want to make a resolution to get financially organized, but I don’t even know where to begin. What should I do first? 

When it comes to finances, the first thing we ask someone when they walk through our door is, “Do you know what you have?” We encourage people to sit down and make a list of everything they own. It is completely normal to have accounts at more than one bank or credit card company, and it can be hard to remember all of the important details off the top of your head. Keeping a running list makes it easier to know where each account is, how to access it, and who to contact.

Once your finances are organized, it’s equally important to make sure your affairs are in order in case something happens to you. Some things you should consider are whether you need a last will and testament, a power of attorney, or a living will. Usually, attorneys can assist you in drafting any of these legal documents.

I’ve heard a lot about financial advisors lately, so is this someone who can help me get organized? I’m not sure I even know what they do!

Many people in the world of finance call themselves financial advisors, so finding the right professional to help you can be a challenge. Here are two questions to ask yourself as you choose a financial advisor:

1. What are their education credentials and compensation structure? Many financial advisors have credentials certifying their educational and professional backgrounds. The CFP® (Certified Financial Planner) certification or the CFA (Chartered Financial Analyst) professional designation are two credentials many financial advisors have obtained through rigorous study and testing. Financial advisors are most commonly compensated by an hourly or annual fee, a fee on the percentage of assets managed, or some combination of the two. Some are compensated via transaction fees or commission. It’s important to find the right fit for you when hiring a financial advisor, so don’t be afraid to ask the tough questions upfront. You’ll be much more comfortable in the relationship if there is a clear understanding of the expectations from the start.

2. Is the financial advisor required to act as a fiduciary? A financial advisor who is a fiduciary has an ethical and legal obligation to act in your best interest at all times when taking care of your financial stability and managing risks. As such, a fiduciary cannot put their company or personal interests ahead of yours. Advisors who are not a fiduciary only have to satisfy the suitability standard, which does not bind a financial advisor to strictly act in your best interests, because as long as an investment can be deemed suitable for you, then it can be purchased. In the same way you should want a doctor to be familiar with your health before treatment, you should want your financial advisor to fully understand your circumstances before investing and managing your money.

I’ve been interested in learning more about investing and how it could benefit me, but honestly, it’s a little intimidating. I’m also not a millionaire, so is it even a viable option for me?

Investing is for everyone! It can help you grow your money so you can accomplish goals for your immediate and long-term future. But let’s get one thing out of the way first: The greatest benefits of investing come to regular savers.

One of the most common goals we hear from people is a desire to have enough money to retire when and how they want. No matter what retirement looks like for you, one thing holds true across the board: Steady saving over time is your friend. Consider this example: Jane starts saving $100 a month when she’s 25, while Julie starts saving that same amount when she’s 35. Assuming each of them earns 7% per year (a long-term average return of a conservative, diversified portfolio), when they turn 65 and decide to retire, Jane will have $262,000 while Julie will only have $122,000. Now $262,000 may not seem like it will carry you very far in retirement, and perhaps that’s true, but the point here is to show how starting sooner and investing over time makes your money work for you.

Starting early can make a difference when you are investing for the future, but it is never too late to start making your money work for you. Building your portfolio now allows you to save and invest for your financial goals and stability. Whatever your goals, investing is a powerful tool that can help you succeed in the future.

Key Financial Steps in Your 20s, 30s, and 40s

The decades before you turn 50 have a much different financial look and feel than the decades after you turn 50. Your 20s, 30s, and 40s are growth and accumulation decades, setting you up for that peak earning decade of life: your 50s.

While it’s hard to think ahead to what life will look like after you turn 50, it’s fair to say that every little bit you can do in your 20s, 30s, and 40s will set you up for a much better future. And, your future self will thank you for this planning! At Reliant Investment Management, we know how to help you achieve your goals at any decade of your life and how to grow with your needs.

In Your 20s: Getting Started

Fresh out of school, your 20s are often associated with freedom. Your first job, your first paycheck, maybe even your first house — everything feels new in this decade. Emily Dafferner, a CERTIFIED FINANCIAL PLANNER™ with our firm, says this is the decade to begin building strong financial habits. “Once you’ve set them [strong habits], it’s hard to break them,” she explains. Strong financial habits include strategies like saving for retirement and managing monthly cash flow so your balance never creeps below zero.

Developing solid saving habits in your 20s is imperative. Ideally, you want to aim for at least 10 percent of your paycheck to go into a retirement account by your late 20s. One of the best ways to make this a part of your financial routine, Emily says, is to automatically draft a portion of your paycheck into a savings account each month, whether through direct paycheck deductions to a retirement account or automated transfer from your checking to your savings account. “Plan to save upfront. If you wait until the end of the month to put extra money aside, there will never be any extra money!” The reality for many people is that if you can see it and you can touch it, then you will spend it. But the inverse is also true! If you can’t see it and you can’t touch it, then you won’t spend it. So, plan to save first, then spend the rest.

In Your 30s: Grow and Build

Your 30s often represent a decade with a stronger sense of stability. And although retirement will still feel far off, it should be top of mind when it comes to your finances. Instead of allocating 10 percent of your salary toward retirement, Emily suggests increasing that number to 15 percent if you can. This may mean going out to eat a little less or staying at a less expensive hotel on vacation. But these small changes will reward you later.

Establishing a firm budget can also help combat “lifestyle creep” which plagues many 30-somethings. “By 'lifestyle creep,' we mean lifestyle spending that comes when you get a raise and spend it rather than save it,” Emily says. In other words, keep the “keeping up with the Jones’s” feelings at bay in your 30s. This is paramount.

Other areas to keep in mind during your 30s are 401(k) growth and insurance. If you have a career pivot, do your best not to cash out your 401(k), as this could disrupt the compounding process. You’ve set that money aside for retirement, so keep it set aside. Regarding insurance, Emily says, “This could look different whether you’re single or married, kids or no kids, but make sure you’re adequately insured for unexpected disability or loss of life.”

The 40s: Accumulation

Older kids, established careers, and finally finding your “forever home” ... welcome to your 40s! This is the decade to max out 401(k) savings, save for kids’ college (without touching your retirement fund), get your estate plan in order, and diversify your savings. “Now that you’ve hit your stride in your career, it’s time to really prioritize saving for retirement,” Emily says.

For those with kids, start thinking now about whether or not you’re going to help pay for college and how to do so if you are. Establishing a solid college savings fund without dipping into your retirement is critical while in your 40s if you want to help your kids pursue their higher education dreams, Emily adds. Also, now is the time to get your estate plan in order. “We all think we’re invincible until we’re not,” she says. “Now is the time to think about having the appropriate documents in place if you haven’t already done so.”

If you’ve been saving since your 20s, now is also the time to begin diversifying your accounts — both your holdings and your account structures. “It's best not to have all your eggs in one basket!” Emily says.

In Summary …

It’s hard to look at a financial plan for the arc of your whole life. But, breaking it down into bite size chunks, it’s easier to see how your 20s feeds your 30s, how your 30s feeds your 40s, and so on.

Next time, we’ll be back with tips for planning for the next three decades of life: your 50s, 60s, and 70s.

Reliant Investment Management, LLC is an independent investment advisory firm that provides customized portfolio management and comprehensive financial planning tailored to each client’s unique needs and circumstances. To set up a free consultation regarding your personal financial circumstances, please contact Reliant Investment Management at askreliant@reliantllc.com or (901) 843-0600.