Updated: Feb 17
Do you remember when you were 25? You were at the beginning of your career or working towards completing an advanced degree. Life was simpler then, but in the years since you worked towards building a future for yourself.
In the same timeframe, you will likely be retired.
Are you confident with the choices you’ve made towards your financial wellness? Are you on track to having a healthy retirement income? Will you have the assets to care for the ones you love? These and many more questions may concern you.
It is essential to address heavy questions such as these. Too often tough questions are avoided and shuffled to the sideline. But avoidance is not a good strategy when you are assessing the health of your retirement plan.
Here are three essential strategies to keep you on the right path toward financial wellness.
1. Give yourself security by having liquidity.
During the Covid-19 pandemic, 32% of Gen-Xers have withdrawn or considered withdrawing funds from 401k accounts for living expenses. An adequate rainy day fund can help prevent withdrawals which can be ruinous for achieving your financial independence and making progress toward your goals.
Ask yourself this question: “Do I have six months worth of living expenses saved in a savings account?” Be honest about your answer.
Financial wellness means striking a balance between living responsibly today and planning wisely for tomorrow. Give your future self security by having liquidity available. If you are not putting $50, $100 or $200 each paycheck into an emergency savings account, start today. This account isn’t for trips to the Bahamas, but for true emergencies like being laid off from work or an unexpected car accident.
Once you have a rainy day fund set up and you have fully maxed out your 401k contributions, then set up accounts for your other goals. Learn more about savings here.
2. Define goals and assess progress.
What are your personal goals for the future? Spend 15 minutes and write them down. These may include, money for a new car, an annual vacation fund, paying off credit cards, or saving the down payment to move to your dream home. Do it now, I will wait [cue elevator music].
Get started today:
Write down one personal financial goal. It should be specific, measurable, action-oriented, realistic, and have a timeline.
Decide if your goal is short-term (up to 3 years), mid-term (3 to 10 years), or long-term (10 or more years), and create a timeline for that goal. This may change in the future, but focus on what is in front of you now.
Determine how much money you need to save to reach your goal and separate that amount by the month and/or year.
Think of all the ways you can reach that goal. Include saving, cutting expenses, earning extra money, or finding additional resources.
Decide which is the best combination of ways to reach your goal and write them down.
That might sound daunting, but it’s best to set two or three incremental goals. Prioritize, then achieve. After accomplishing some of the easier goals, you gain confidence in your decision making. That confidence will provide motivation to achieve the more difficult targets that require more time and discipline.
3. Have a holistic long-term plan.
You may be putting money into your 401k and have some money in savings, but do you have confidence about when you can retire and how much income you will need? Perhaps you remarried. How do you balance paying for your children’s college while living your best life with your new spouse? If you have complex circumstances, perhaps it is time to consider hiring a financial advisor.
The allocation of financial resources to meet competing and important goals can be challenging. A financial planner can help define your goals and assist in prioritizing your investment to make them a reality. Good advisors will provide you with guardrails, accountability, and guide you through something that seems insurmountable. You will feel better (and more confident) making progress toward goals such as traveling more or saving for retirement.
While few DIYers follow through and take action, many underestimate how much they need to save to replace their income during retirement. Consider that to save $1 million at age 65 you should put away $820 a month starting at age 35 but that number rises to $1,920 a month at age 45. Waiting too long makes it difficult to catch up.
Whether focused on health or wealth, a modest regular investment will pay returns years into the future. Once your financial advisor has ensured that you have proper life insurance, health insurance, disability insurance and a financial plan, consider what you are doing to enjoy today and have a healthy balanced future. Take time to exercise your mind and your body. You may want to walk each day, spend time with friends, or get a little exercise.
All the money and plans in the world won’t do much good if you are not enjoying today and maintaining your health for tomorrow.
We’d like to help you make progress towards your goals.
Take action today! If you have more than $2 million saved and need help from a wealth manager, the Peak Wealth Planning team can assist.
Do you have a question you’d like me to address in Peak Wealth’s weekly blog? Reach out to us!
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About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.