The end of the year is here and it’s time to make plans. Do you want to save and invest more next year? Here are some thoughts on how to do it.
Automatic contributions are a powerful force in financial planning. They eliminate one more decision to make and remove an item from the to do list - both good things. They also force our spending plan to adjust to what’s available, and this, prioritizes what expenses we take on.
What is the key? Review your spending and decide on an amount you think you can work with -- then increase that number by at least 10%. Don’t wait until things settle down or your budget feels normal. It may never feel normal, there is always something that we want/have to spend on. Life is a constant state of transition.
Important: saving is not investing. We’ve all heard that cash is king, and I admit it’s a cool saying with a nice ring to it. While It’s certainly important to have a healthy savings account, too much cash works against you. Inflation takes away purchasing power and opportunity cost can be huge. Most savings account rates are well below 1%, while the equity markets and other investments offer the potential for significantly higher returns over the long-term.
Note: Talk to us about how to direct your resources. There are important choices to make between employer plans, IRAs, taxable accounts, etc.
Consolidating accounts can also provide a boost to your investing efforts. Think about how good it feels after you organize your garage or clean out all of those old clothes from your closet. Getting organized financially feels the same and can create the motivation to stick to the plan.
Combining accounts can create motivation but it also has some tangible benefits. Fewer accounts may be easier to manage, track, and can be more tax-efficient. It also makes it easier for your beneficiaries to manage your affairs.
How to do it? Review which banks you work with, find old retirement accounts from former jobs, and other investments spread out in different places and look to see if consolidating makes sense.
Watch it Grow
Getting results and seeing your accounts grow feels good and provides validation to keep moving forward. It may take time to build momentum, but results will come the longer you stick with it. Create a simple balance sheet and review it often, a good practice is to check in on things monthly.
Looking for an easy way to do it? Our client portal app allows you keep tabs on everything from your phone, and with FaceID it’s never been easier to log in. Ask me for more details.
Now let's get to it!
The opinions voiced in this material are for general information only. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.