• Matt Oberholzer

Finance 101

Saving for retirement is something everyone has heard of since they started working. However, it’s something that people rarely pay attention to until they are already 10+ years into their careers. Retirement, as a goal, is more easily achieved the earlier you start to plan for it. There are several easy steps along the way which will ensure success.

  1. Set short-term and long-term goals. Short-term goals may include saving for a new car or paying off credit card debt. No matter how simple of complex the goal is, it is a good idea to start planning and saving to reach the goal. When the time comes for the new car, wouldn’t you rather have the down payment easily accessible rather than needing to borrow more and pay thousands of dollars more in interest? The same is true for long-term goals. If you start saving $100/month at age 25 instead of 35, you will have twice as much in your account by age 65. Setting goals is laying the foundation for success.

  2. Create a budget. I know budget planning isn’t everyone’s favorite topic, but it is an important step in planning for your future. One common approach to budgeting is to use the 50/30/20 framework. 50% of your after-tax income s used on essentials (food, mortgage, car payments etc.), 30% is used on other “needed expenses” (phone, cable etc.) and the remaining 20% is for savings (emergency fund, retirement, etc.). Revisiting your budget annually or even monthly can help you stay on track to meet your goals.

  3. Build an emergency fund. There’s no worse feeling than getting a bill that you can’t afford. You may need to replace a furnace, replace a knee, or you may be removed from the workforce. Regardless of your situation, you must have an emergency fund. Typically, an emergency fund should be enough to last you 3-6 months of expenses without changing any of your habits, however, everyone is in a different situation, and some may feel more comfortable with a larger fund.

  4. Payoff your credit card. Credit card debt can make or break you. It’s a great idea to have a credit card or two to increase your credit score, but they can also be damaging. Some people look at credit cards as “free money”. Credit cards typically charge an interest anywhere from 15%-27%. If you are experiencing credit card debt that is hard to payoff and you have a good/decent credit score, it may be wise to shop for a new credit card that offers a 0% APR period and allows a balance transfer.

  5. Save Early for Retirement. There’s no one rule for how much you’ll want/need to save for retirement, but a solid guideline is to have a multiple of your salary set aside at different ages. As you can see below, having retirement account balances equal to two times your salary by age 35 sets you up for success. When you’re 50, the aim is to have six times your salary in retirement account, and by your late 60s, having 10 times your salary saved up is recommended.

  6. Invest for the long-term. The right stock-bond mix depends on your personal goals, stomach for risk and time horizon — or number of years you expect to hold your investments. Saving for retirement breaks down into how much you want to invest in stocks and how much in bonds. Stocks can be volatile at times, though over long periods (10 years or more) they have historically delivered higher returns than bonds.

  7. Borrow smart. Big-ticket purchases typically involve taking out a loan; The house you want to buy, the cars you drive, helping your kids pay for college. The key to building financial security is to only borrow what you truly need.

Even if you feel you are not where you should be, there is no better time to change that then today.



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