Tips to True Financial Empowerment By; Shadress Burks
We all want different levels of success and wealth we try and achieve. Some people want to be well known and wealthy; whereas, others simply want to live a comfortable life without financial burdens. Either way, everyone should be equipped with the tools to embark on a path of financial empowerment. In each stage of our lives financial planning and preparation is essential. Building financial independence early leads to true empowerment later on. Check out the tips below and get started on your road to financial empowerment.
20’s
In your twenties, most are experiencing new found freedom. This decade is made up of fun, education, and independence. At times, very little thought goes into future financial planning. On average, most twenty something people have either went off to college or moved out of their parent’s home. Getting a jumpstart on saving and financial responsibility will definitely help in the long run. • •
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Engage in Financial Planning. Consulting with a professional helps you set yourself up for a successful future. Purchase group life and disability insurance (this is your biggest asset). The days of young people getting by without health insurance are long passed. Obtaining life and disability insurance early on can help prevent any rejections later on because of health complications. Equipping oneself with health insurance helps prevent future debt that can be acquired from excessive medical expenses. Full participation in employer’s 401(k) plan or if employer doesn’t have a 401(k) plan, start a Roth IRA. Save at least 10% of your salary to begin with while increasing your contribution by 1% per year if possible. If it goes out of your paycheck before you see it, you will adjust to it. Pay off debt. Eliminate early acquired debt during this time. Small collection items or credit card balances that can affect your credit score now should be tackled before they become large financial burdens later. Save for a home; save for an emergency. Whether it’s owning a home or saving for a rainy day; your 20’s would be the time to do it. Having a sufficient nest egg set aside for a large purchase such as a home or for a major repair will help keep you from falling prey to misuse of credit cards.
30’s
Your thirties have approached and you’ve started laying the ground work for financial empowerment. If you’re just now starting on your journey to financial empowerment, it’s never too late. So your twenties are gone and you are embracing a new era. Maturity is setting in, a new career is on the horizon
and you are preparing to start a family. Toss in a new car and possibly a home and you’ve got a new set of financial responsibilities. For this phase of your life a different set of tips will help you navigate your 30’s and help you stay on track. •
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Update financial plan. Since your financial responsibilities have changed, your financial plan should reflect them. Large purchases such as a home, car and other investments should be included in your financial plan so you can maintain a clear picture of your financial goals. Sign up for supplemental group life insurance. Also, purchase life and disability insurance outside of work. If you have children, get life with a child rider. We all love the option of full benefits that come with the nice salary and corner office, but what happens if you lose your job? Purchasing additional insurance that is not dependent upon your employment will create a better security blanket for you and your family. Increase your 401(k) contribution. If you don’t have a Roth, start one and start saving. If your salary has increased, your 401k contribution should as well. In addition to your 401k, you should also start an IRA outside of work. Increasing the areas in which you save in will ensure a comfortable retirement when you decide on that option. Carry no credit card debt Save for an emergency or a large purchase. If you have children, open up a 529 Plan for education.
40’s
It’s official, you are definitely an adult! You have probably become settled in your career, your family has grown and you are working towards retirement. Your upward mobility has probably increased your salary and with that comes bigger financial purchases. Maintaining your financial responsibility is of great importance as you draw closer to preparing for retirement and your children seeking higher education. Grab hold of your financial reigns
as we continue on this journey to being financially empowered. • • • • • •
Update financial plan Update will, durable power of attorney, beneficiaries Increase your 401K contribution Enroll in health care & dependent care reimbursement accounts No credit card debt Continue to save in a Roth IRA
50’s
The time has finally come and you’ve come full circle. Your kids are close to leaving home to head off to college, while you’re counting down to retirement. You’re ready to enjoy the fruits from all the hard work you have put in over the years. Before you do be sure you follow to these steps to guarantee an easy flowing and comfortable retirement. • • • • • •
Update financial plan Update will, durable power of attorney, beneficiaries Max out your 401K contribution Invest outside of 401(k) Obtain long-term care insurance Create retirement income plan
The overall keys to financial empowerment are to save, save, save and eliminate debt. Live within your means. Minimize the plastic use. If you can’t afford it, don’t buy it. Develop a budget and stick to the budget. It is very important for you to know how much income is coming in and what is going out. You have to identify what you are spending your money on. Be sure to save every receipt for a month so you are able to get an idea of where you can cut back on your spending. This will assist in tracking your spending habits and will aid in you having additional money to pay off debt or save for that emergency. Financial information provided by: Halina Conti, CRPC, MBA Financial Advisor Ameriprise Financial Services