The initial process to begin saving for retirement, college, or general investing for wealth down the road can seem overwhelming and arduous. Many people simply don’t know where to begin, so they avoid the process altogether. Later, they look back wishing they would have started earlier or had those wasted dollars back. Here are a few tips to get you on the path to maximizing your investment and retirement savings.
Start now and put the investment process on autopilot! Initially, the pain of having less money in your pocket is hard, but over time it will be worthwhile. Start contributing to a 401(k) or retirement plan at work. Have the deduction automatically pulled from your paycheck. If this isn’t an option, start an IRA or investment account and set up an automatic link from your bank to pull the money monthly. Having the money pulled automatically will stop the temptation of not saving. You know the excuse, “We need the money, just this one month.” Eventually, it will become more like a bill versus optional savings.
Make sure you are taking full advantage of your retirement plan at work. If they offer a matching contribution, do the full match. If you don’t, it is like throwing away free money. A matching contribution can help you grow your retirement dollars quickly and is a great place to start. If your work doesn’t offer one, then meet with an advisor and start an Individual Retirement Account (IRA) that is most tax advantageous for your personal situation.
Deducting money from your paycheck for retirement can feel painful because of the loss of income. If you feel like you can’t start big, then start small. One strategy I coach investors to do is to adjust their contribution amount up 1% each time they get a pay raise. Why this seems to work better than adjusting each year on January 1st is simple. The blow of a smaller paycheck is lessened by the raise and sometimes you still net a higher dollar amount in your check (depending on the math of course). Eventually, you will be contributing a much higher percentage of income to investing than you originally thought possible. It takes time but it’s worth it.
Finally, forget that you even have this money. This is not your money. It is your 60 or 70-year-old self’s money. Time horizon is crucial in financial planning and investment management and you must be prepared to have a decade or more to invest in order to give the investment time to grow or wait out a downturn in the market. Like Warren Buffet said, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
The first steps to investing effectively can be difficult. If so, make an appointment with a financial advisor. Even one hour of planning can set you on the right path for years to come.
Deka Wiebusch AIF® is a financial advisor at Skyline Advisors, a locally owned and operated Registered Investment Advisor providing money management and financial planning services. Skyline Advisors is located at 405 32nd St., Ste 201 in Bellingham and at www.myskylineadvisor.com.
This article is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Skyline Advisors and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Skyline Advisors unless a client service agreement is in place.