Most people don’t think about financial planning in their 20’s. The fact is, many don’t think much about retirement savings until their mid to late 40’s. The best time to actually begin saving is right out of high school.
This is not something most kids are taught in school. They could begin their retirement savings very easily with a ROTH IRA. This would allow them to save a few dollars every month at a point in their lives where they have very few expenses.
Why a ROTH
This may be a great place to begin for younger investors or those below the income phase-out rules. Roth IRAs are unique due to current tax law and although there aren’t tax deductions allowed, as there are with a Traditional IRA contribution, at retirement any distributions are considered non-taxable. The benefits of tax-free income at retirement can be quite appealing and most individuals may contribute up to $5,500 of earned income. Be careful as there are income threshold phaseouts disallowing contributions to a Roth IRA and you may benefit from some advice from a professional on this.
Financial Planning at All Life Stages
If you have been ignoring your financial planning you are not alone. According to a recent study*, as many as one-third of Americans do not have a financial plan. Let’s face it, you probably have recently spent more time planning your family vacation or a purchase than you have on your financial plan.
Financial Guidance is Key
This same study found that 43% of people had not spoken to anyone about their finances, including friends, family or colleagues and over 20% had no confidence in being able to reach their retirement goals. Since most people have not received any training on financial planning, getting the right guidance is very important.
With the help of an accredited financial planner, you will receive clarity on where your finances are headed and how to best meet your goals.
Savings vs. Spending
Many people consider themselves “savers” putting away a little each week or month. In principle, this is good practice. Unfortunately, if they are still spending and living above their means their debt will far out way their savings. The amount of interest earned on the average savings account in no way compares to the interest rate on a credit card.
Solution to Building Wealth
While this may be painful to some, the most obvious solution is to pay off debt and live within your means. With the help of a trusted financial advisor, you can set a budget and determine the best solutions to get to your specific financial goals. There are many financial tools available to assist in saving and growing your money and your financial planner should choose the ones that suit your life circumstances, timeline and risk tolerance.
Why Hire Someone to Help Establish a Budget
You can create your own budget using a template. Using a financial advisor to review or create your budget can take the emotion out of it and help you dig down a little deeper into your true financial picture.
Couples may find that using a third party eliminates stress and possible arguments. Even without the possibility of friction, many may overlook items that should be included. If the budget is not complete the financial picture will also not be complete. It is very important that you allow your financial advisor to fully understand what you have and where you would like to see yourself in 10, 20, 30 or more years.
When Should We Begin Financial Planning?
The bottom line is – it is never too early or too late to begin financial planning. With the help of a financial planner, you can find the solution that suits you best. It may require you to tighten your belt or make a few changes in your spending habits but it will improve your overall financial future.
Please remember that a financial plan needs to be reviewed and possibly adjusted on a regular basis in order to work at its optimum. Also, it is advisable to research the financial advisor you hire. Make sure they have had no complaints and that they are proficient at what they do. A second opinion can be of great value to ensure you are getting the services you need to reach the financial goals you desire.
This information is not intended to give specific recommendations, investment, legal or tax advice. Advisory services offered through Nepsis Advisor Services, Inc.; an SEC Registered Investment Advisor.