It isn't how much you make
. . .It's how much you keep!
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Everyone approaches their finances differently, but there are common mistakes that certain money personalities make. The following highlights five different money personalities, the mistakes they make, and how they can improve their financial picture.
Entrepreneur
Because they put all their financial resources and energy into their business, entrepreneurs may make mistakes such as cashing out their retirement plans to fund their business, holding too much debt, or even getting behind on self-employment taxes.
Entrepreneurs would be best served by developing a business plan with income and expense projections to ensure they use debt wisely to fund their business. They should also make contributions to a retirement plan annually, even if it’s only a few thousand dollars. And finally, entrepreneurs should work with a tax professional to help reduce their taxes as much as possible,
while making sure quarterly tax payments are made.
The Saver
This is the person who follows all the rules and does it just right. They fully fund their retirement
accounts each year, don’t carry much debt, and have plenty of savings in the bank for any unexpected expenses. While this money personality may get to retire early, they may want to stop and smell the roses once in a while.
The High-Income Earner
Professionals, such as doctors and lawyers, fall into two groups: savers and spenders. Those who
fund a large lifestyle may find they have trouble funding their retirement because they’ve spent too much.
Big earners need to develop a financial plan so they understand how much money they will need
to fund their retirement based on the lifestyle they want to live. They should also pay themselves first with a predetermined amount to
saving, before buying nicer cars or bigger houses, as well as considering setting monthly spending limits.
I Need to Save?
This money personality spends their paycheck as soon as it hits their account, and in some cases, live beyond their means. They have no savings if an unexpected emergency comes up, and they are likely carrying too much debt. To be able to retire, this person needs a financial plan with a strict budget to help pay down debt and develop both long- and short-term savings.
Doing Fine and Enjoying Life
This person saves and spends. They want to enjoy life experiences along the way to retirement, such as vacations, maybe a boat or
cabin. While they contribute to their 401(k) plan, they may not have a financial plan that includes short-term financial goals and how much they need to save for retirement.
While it is great that this money personality saves, they need to ensure that their spending isn’t outpacing their savings. By developing a solid financial plan, this money personality can create a more balanced approach to saving and
spending.
What’s Your Money Personality?
You should determine where you fall on the spectrum of money personalities so you can develop a financial plan that suits your personality, but also helps you secure your future.
Please call if you’d like to discuss this topic in more detail.
Most people think when they start earning more money, they’ll start saving more money. But what often happens is the more you make, the more you spend. If you want financial independence,
you have to establish a savings routine. The more money you make, the more your savings rate needs to increase.
While it may seem like a daunting task, it can be accomplished. The only way to reach financial
independence is to save and live within your means. Your savings should include retirement account contributions, matching funds from
your company if available, cash savings, and any other investments.
Savings at Every Age
Your 20s: You are just starting out and, hopefully, you’ve found a good job that pays a reasonable
salary. This is the beginning of the accumulation stage, so start by paying off any debt you have and work to save at least 10%–25% of your
income. If your employer offers a 401(k) plan, start investing right away. Try to contribute as much as possible or at least as much as your
employer will match.
Your 30s: Hopefully, you have now found out what you want to do for a living and have had a jump in income. You are still in the accumulation
stage, so you should be increasing contributions to your retirement account and trying to contribute the maximum per year. By the end of your 30s, you’ll want at least twice your annual salary saved. A simple example: If you’re making $50,000 annually, you’ll want to have $100,000 accumulated in savings by age 39. But remember this includes retirement accounts.
Your 40s: This is the decade of major responsibilities, as you probably have dependents. Your income may have increased as you climbed the ladder at your job or moved to a
new one. And even with the increase in expenses, you should also be increasing your savings rate. By the end of your 40s, you should
have saved four times your salary. Now you will want to max out your contributions to retirement accounts as well as monitor your investments
for performance.
Your 50s: You are now at your peak earning years and your saving rate needs to be at its highest. Your expenses are still pretty high; but by the end of this decade, you will most likely be an empty-nester, and expenses should decrease. By the time you reach 59, you’ll want to have saved seven times your income. Monitor your investments so you can make adjustments to
increase your returns.
Your 60s: You’re getting close to or have retired. Your mortgage may be paid off and expenses have decreased. Your saving should be at its peak, which is 10 times your income prior to retiring. You can now start to relax as you will
receive distributions from your retirement accounts as well as Social Security benefits. You’ll need to make sure that you are informed
about distribution requirements of your retirement accounts.
Your 70s and beyond: Now all of your expenses are covered by your retirement account distributions and Social Security benefits. Hopefully, you are reaping the benefits of all those years of saving.
Watch for These Warning Signs
As you go through the journey to retirement, you may not be able to accumulate the level of savings you need, but you should have acquired a good amount of savings for a comfortable retirement.
Take stock of how much you are saving every year and look forwarning signs that you are not saving enough. If you experience any of the following, you need to take a hard look at your financial situation to get on track:
You have no idea how much money you’re spending every month, which means you are most likely overspending.
You don’t have savings goals or a savings plan. If you don’t have goals and a plan to achieve
them, you will have a hard time saving for important milestones.
You’re living paycheck to paycheck. It’s time to take a serious look at your finances to see what can be reduced or eliminated.
You’re putting off saving for retirement. It will get here quicker than you think, and this is
the one thing you really need to start saving for as early as possible.
You can’t pay your credit card balance in full, which means you probably have significant debt.
You don’t have an emergency fund. You know the unexpected will happen and need to be prepared.
Frankly Speaking
“When they call the roll in the Senate, the senators do not know whether to answer ‘present’ or ‘not guilty.’ ” -President Theodore Roosevelt
“I never gave anybody hell! I told them the truth and they thought it was hell!” -President Harry S. Truman
Whether you pay income taxes on April 15 or file for an extension, PLEASE be sure to do so. And get your final 2020 Traditional & ROTH IRA contributions in by then. Consider a monthly Systematic Investment Plan to help budget your contributions and ‘Pay yourself first!’ for 2021.
An extension to Oct. 15 is usually available IF you request it and pay at least 90% of the tax due. You also have until then to make 2020 contributions to SEP and SIMPLE IRAs which offer tax advantages to the self-employed with different filing guidelines. Do you know what they are or how they could help you? If not, it’s time we spoke. Please contact me ASAP!
Please contact me if you would like to discuss this in more detail.
What if you’re saving as much as you can, but still feel that your retirement savings goal is out of reach? As with many of life’s toughest challenges, it may help to focus less on the big picture and more on the details.
Regularly review your assumptions
Whether you use a simple online calculator or run a detailed analysis, your retirement savings goal is based on certain assumptions that will, in all likelihood, change. Inflation, rates of return, life expectancies, salary adjustments, retirement expenses, Social Security benefits — all of these factors are estimates.
That’s why it’s important to review your retirement savings goal and its underlying assumptions regularly — at least once per year and when life events occur. This will help ensure that your goal continues to reflect your changing life circumstances as well as market and economic conditions.
Break down your goal
Instead of viewing your goal as ONE BIG NUMBER, try to break it down into an anticipated monthly income need. That way you can view this monthly need alongside your estimated monthly Social Security benefit, income from your retirement savings, and any pension or other income you expect.
This can help the planning process seem less daunting, more realistic, and most important, more manageable. It can be far less overwhelming to brainstorm ways to close a gap of, say, a few hundred dollars a month than a few hundred thousand dollars over the duration of your retirement.
Stash extra cash
While every stage of life brings financial challenges, each stage also brings opportunities. Whenever possible — for example, when you pay off a credit card or school loan, receive a tax refund, get a raise or promotion, celebrate your child’s college graduation (and the end of tuition payments), or receive an unexpected windfall — put some of that extra money toward retirement.
Reimagine retirement
When people dream about retirement, they often picture exotic travel, endless rounds of golf, and fancy restaurants. Yet people often derive happiness from ordinary, everyday experiences such as socializing with friends, reading a good book, taking a scenic drive, and playing board games with grandchildren.
While your dream may include days filled with extravagant leisure activities, your retirement reality may turn out to be much different, and that actually may be a matter of choice.
Do your best
Setting a goal is a very important first step in putting together your retirement savings strategy, but don’t let the number scare you. As long as you have an estimate in mind, review it regularly, break it down to a monthly need, and increase your savings whenever possible, you can take heart knowing that you’re doing your best to prepare for whatever the future may bring.
If you have questions or would like more information on planning for retirement
please contact Frank
Representatives are registered through, and securities are sold through Nationwide Planning Associates, Inc., Member FINRA/SIPC, located at 115 West Century Road, Suite 360, Paramus, NJ 07652. Investment advisory services are offered through NPA Asset Management, LLC. Insurance sold through licensed NPA Insurance Agency, Inc. agents. Nationwide Planning Associates, Inc. and Frankly Financial are non-affiliated entities.
This communication is strictly intended for individuals residing in the state(s) of CO, CT, FL, NJ, NY, NC, OH, PA and RI. No offers may be made or accepted from any resident outside the specific states referenced.
Prepared by Broadridge Advisor Solutions Copyright 2020.