By Bryan Lee, CFP®, MBA
When we’re young, it’s easy to postpone making the best financial decisions for the future. Many of us were never taught the importance of retirement, investing, or financial planning, and we only made decisions based on what we knew at the time. As we get older, we realize the importance of planning for the future and often wish we had started sooner.
What most people don’t realize is that money is far from your most valuable asset, and the same goes for your retirement plan or investment fund. The most important factor in your wealth management process is time and how you spend it preparing for the future. Time is the only asset that you truly never get back. Although you can’t predict what’s to come, there are ways to avoid making the mistakes that get in the way of your growth.
Start Preparing for the Future Early
You’ve probably heard this before, but it’s a tried-and-true solution for wealth management that works every time. Start with a 401(k) if your employer offers a retirement plan, especially if an employer matching contribution is offered since it is a guaranteed return on the funds contributed. You can also save a percentage of your monthly income in an investment account such as a traditional IRA or Roth IRA and/or a taxable investment account, depending on your situation. The earlier you start, the better chance you have at growing your wealth.
By investing and growing your portfolio at a young age, you increase your money’s potential for growth. Compound interest is the benefit of investing your money early. The future does not wait for anyone, which is why it’s important to take advantage of the time you have while it’s still here.
Beginning to invest at age 25 and contributing regularly could result in more than doubling the value of your investments at age 65, compared to waiting to start at age 35. However, if you haven’t built up your investments yet (or maybe you have built up sizable cash savings but you’re not sure what to do with it), it’s not too late – the best time to invest is always in the past, but the next best time is now.
Understand How to Make Your Money Work
Saving money is a great habit only if you leverage it in the right ways. Even if you have an emergency fund stashed away, it’s fine to keep it in a high-yield savings account. However, if at least some of your emergency fund is kept in a taxable brokerage account, you can potentially earn more than if it were in savings depending on how it is invested, and you usually have the flexibility to withdraw the funds within a few days if needed. The reality is that when you don’t let your money work for you, you hinder your financial growth.
Allowing your cash to sit in a savings account right now is effectively not much different than putting it under your mattress. We know that currency depreciates due to inflation, which is why when you allow money to sit in your savings account, you’re not giving it much potential to grow. At the very least, high-yield savings accounts such as money market accounts provide you with more benefits than storing cash in a regular savings account. It’s important to remember that not making a decision about what to do with your money is, by default, making a decision.
Work With a Financial Planner
If you have managed your finances your entire life, delegating your financial matters to a professional for a fee can require a mindset shift. However, the value that a financial planner provides could more than pay for their fee many times over, by helping in a myriad of ways – such as tax-loss harvesting in your investment portfolio, identifying potential gaps in your estate plan, and providing guidance and reassurance during market turbulence so that you don’t sell low and buy high. Not all advisors are created equal, but there are advisors out there who are required by law to act as fiduciary advisors – that is, they are required to put your best interests ahead of their own.
Just like you should meet with your doctor once a year for your annual physical, we believe it is important to have a financial checkup at least that often as well. Advisors offer guidance to help you make informed decisions about your future and help you avoid costly mistakes and fine-tune many of the great habits that you may already be doing. It’s wise to assess if an advisor is the right fit for you, but don’t allow this process to inspire procrastination. Advisors are here to help you understand even the most difficult situations and develop strategies that will pay off in the long run.
We’re Here to Help
As financial advisors in Plano, TX, we specialize in holistic financial planning and wealth management both locally and remotely for clients around the country. We want to help you navigate your financial journey so that you can spend more time on what truly matters in your life.
You can’t control the financial markets or the unexpected, but you can examine your habits and make incremental changes to become more financially adept at growing your wealth and planning for the future. At Strategic Financial Planning, we offer strategies to help you achieve your goals. If you need guidance on improving your financial habits and discovering opportunities for growth, call (972) 403-1234 or contact us online to set up a complimentary get-acquainted meeting to determine whether we are a good fit!
Bryan Lee is the founder and president of Strategic Financial Planning, Inc., an independent, fee-only financial advisory firm. With more than 27 years of industry experience, Bryan uses a unique client-first financial life planning approach and process to help his clients get the most out of life. Bryan earned his Bachelor of Business Administration in finance and his MBA in international finance from the University of North Texas. He is also a CERTIFIED FINANCIAL PLANNER™ AND CFP®.
Bryan is actively involved in his community and industry and has served on the boards of several associations and charities, including the Dallas/Fort Worth chapter of the Financial Planning Association, the National Association of Personal Financial Advisors, Family Services of Plano, the CITY House, and the Journal of Financial Planning. Bryan has been featured in local and national media, including The Wall Street Journal, Investors Business Daily, CNNfn, USA Today, SmartMoney, Kiplinger’s Personal Finance, Financial Planning Magazine, The Dallas Morning News, and Dow Jones Newswires. And, he has been recognized as a Five Star Wealth Manager and one of Dallas’s Best Financial Planners in D Magazine every year since its inception. To learn more about Bryan, connect with him on LinkedIn.