I, like many of you, have big dreams for my future. I want to see the world, build my dream home, retire to a Cape Cod beach cottage, have 10 dogs, and have a private Starbucks in my backyard. OK, that last one is a little far-fetched, and maybe having two dogs is more reasonable, but I draw the line at giving up any of my other goals.
The harsh reality is that achieving goals often involves more than hoping for the best; it takes hard work, intelligent financial decisions, and comprehensive plans. I’m the first to admit that I’ll comfortably blow $200 at Target on a Saturday afternoon, and every now and then, that’s OK. But I’ve realized that if I want to achieve my goals and set myself up for a successful future, I need to gain some financial literacy starting now.
Because that sounds like a daunting task, I reached out to my trusted advisor, who shared her best advice for securing our futures. Read on as I share her top financial tips!
Meet the Expert
Zoe Anne Hirsh has dedicated her career to helping her clients achieve financial literacy, growth, and success through regular one on one informational sessions. Zoe studied at the University of Wisconsin, Eau Claire, where she graduated with a Bachelor of Business Administration degree. She is pursuing her MBA in Business Management at Capella University and working as a Financial Adviser with Northwestern Mutual.
1. Start Saving Now
The toughest pill to swallow (for me, at least) is that you can’t build wealth and spend all of your money simultaneously. The hard truth is that you have to save money now to ensure wealth in the future. According to Zoe, the sooner you can save 20% of your income, the better. Unfortunately, a lot of people retire and end up running out of money because 1) they didn’t save enough while they were working, and 2) they don’t have their money dispersed efficiently (more on that later).
OK, great. So, how do you save money? Zoe had some great advice on this subject. Her first recommendation is, “Practice paychecks vs. playchecks.” This means we must always pay our expenses first—not right after that new pair of Sam Edelman sandals or those LuluLemon leggings you’ve been eyeing. Prioritizing expenses is critical.
Practice paychecks vs. playchecks. Always pay your expenses before spending money on other things.
This goes hand in hand with her next piece of advice: you will need a budget. A budget allows you to visualize how much money you make, how much you need for expenses (bills, savings, investments, etc.), and how much “fun” money you can allocate. A great way to do this is with the help of a financial planner, but there are great templates available online, as well as tried and true apps to help you understand your finances.
Lastly, as cliché as it may sound, start spending money wisely. Don’t get me wrong; we’re not saying to never spend on fun things. Rather, when you make big purchases, save where it makes sense. If you’re an avid traveler like me, you probably aren’t going to wait until you’re sixty for your next trip. Believe it or not, there is a right way to travel right now. Zoe recommends using a credit card that accumulates travel points, using the app NerdWallet to compare travel credit cards, and remembering that flights are almost always cheapest on Tuesday afternoons. Simple money-saving hacks like this will make all the difference in the long run.
Source: Social Squares
2. Have a Debt Strategy
As we’re all well aware, life can be messy, and every once in a while, life can get worse than messy (thank you, 2020). If the pandemic taught us anything, it’s that we need to be prepared for the unexpected. At any moment, you could be laid off, receive a terrible medical diagnosis, or have any other life-altering news that could negatively impact your life (and your wallet).
That’s why you must always have an emergency fund that you do not touch unless something significant happens. This could start small, say a couple of hundred dollars. Many people like to start with an even $1,000. However, the experts say it’s best to have three months’ worth of your income explicitly saved as an emergency fund. Separate this money from your regular savings account, whether you put it in a different bank account or physically keep it somewhere safe (you know, the ol’ money-under-the-mattress trick).
3. Start Investing Now—with and without Your Employer
A great way to start your journey with investing is through your employer’s 401k program. Essentially, a 401k account holds funds specifically designed for retirement savings and investing sponsored by employers. The employer and the employee can add funds to the 401k account, and employers will often match the funds you put into your account. This is a significant detail you will want to ask your employer: Do they match 401k contributions, and to what extent? Whenever you can, contribute the highest amount that your company will match because the dollars that go into this account are pre-tax, meaning more money for you!
According to Zoe, while you’re in your lower-earning years, get in as many Roth IRA dollars as possible. For all of us non-financial gurus, here’s what that means. A Roth IRA is an individual retirement account separate from your employer, and you pay taxes on the money as the funds go into the account. When you pull funds from your 401k account after you retire, the money will be taxed (because it wasn’t taxed going into the account). However, money that goes into a Roth IRA can be pulled during retirement without being taxed (ergo, more money for the beach cottage down payment).
It’s easy to feel like we don’t make enough money to start investing now, and it’s even easier to put it off for later in life. But the cold hard truth is that investing is a process, and the sooner you throw your hat in the ring, the more benefits you’ll see in the long run.
Investing sooner, smaller is better than bigger, later.
Your employer is not involved with your Roth IRA account, and it can be quite intimidating to start investing without that safeguard. The best thing you can do for yourself is to find a financial advisor to help you invest outside of your employer and set you up with a financial strategy. I have good news for you—we don’t need to be geniuses who understand everything, especially when it comes to investing. We can enlist the help of someone who knows the complexities of the market and will be our right-hand woman in the journey. Investing doesn’t have to be scary. You just have to know who you can rely on.
Source: Color Joy Stock
4. Find a Financial Planner You Can Trust
I can tell you from personal experience that starting to work with my financial planner was life-changing. I had a 401k through my corporate job but had no idea what to do with it. It’s another one of those fundamental life skills we never learned in high school. Zoe was able to maximize the funds in my 401k so that I would get the most return on investment—something I would never have been able to do on my own. She was also there for me while moving across the country (hello, taxes), switching jobs, and buying a new car. She has been my encyclopedia of financial knowledge, and it feels so good to have someone in my corner to offer advice.
That’s why I recommend everyone utilize a financial planner. But where do you find one? A great place to start is by asking around. Ask people in your life to see if they have an advisor they would recommend. Social media is also an excellent resource for finding an advisor.
Finding someone you can trust is the most important part of starting a relationship with a financial advisor. I know that sounds great, but it begs the question: How do I know who to trust? When you start talking with potential advisors, find someone who will make you a long-term financial plan, not someone who wants to invest your money for the sake of investing. In the same breath, find someone who will consider your financial goals while creating your financial plan. After all, it’s your life, your money, and your future!
Ellevest is a financial wellness company offering money coaching, private wealth management advice, and digital investing memberships. The best part? It was created by women, for women.
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Financial Representative – Zoe Ann Hirsh
For all your financial planning needs, refer to Zoe.