As the head of your family, you naturally want to provide for them, whether it’s just you, your spouse and baby, or a busy family of six. Building up financial security takes time, to be sure, but it all starts with a plan. Socking away money as soon as you can is key to ensuring financial stability throughout the decades.
Savings as Expenses
We all have bills we have to pay — no matter what – each month. But if you treat your savings as a regular expense to be paid, you will reap the benefits down the road. Just like you would pay rent or your mortgage, come up with a set amount out of your paycheck that goes straight to your retirement savings. Treating this as a recurring expense, ideally taken out automatically from your check, means you don’t even know what you’re missing.
Add to a Tax-Deferred Account
When you contribute pre-set amounts to a tax-deferred retirement account, you avoid those impulse spending amounts that open you up to tax consequences and penalties. For example, dipping into your retirement account before the age of 59 1/2 slams you with a 10 percent early-distribution penalty. Add as much as you can to your employer-sponsored 401(k) plan, as well as open a Roth or traditional IRA.
Plan it Out
When thinking about retirement, you know you want to have enough money to be comfortable and perhaps travel a bit. Yes, it costs money to travel and do all those things you always wanted to do, but you can’t forget about everyday expenses such as medical and dental costs, income taxes and long-term care. Making accurate projections about what you will need in actuality will serve you well later. Sit down and come up with a list of what you will need in your retirement years and factor that into your plan.
Expecting the Unexpected
Raising a family isn’t always easy. Things go wrong, people lose their jobs or get sick. Build into your investment plan a way to tackle those curve balls so you’re not left helpless. Build up your emergency savings, enough to cover you for up to six months. Ensure your life, health and disability insurance is enough to realistically cover your family if you or your spouse gets sick or incapacitated.
Open a Side Business
If you’re a stay at home mom and want a way to contribute to the family’s savings, consider turning your hobby into an online business. For example, you can sell crafts and homemade items, build up a clientele and make some real money, all with no overhead and low start-up costs. All you need is $100 to get your website up and running. If your business does well further down the line, you can sell it for a song. Investing in yourself – and your skills – is key, says Kiplinger.
Pay Down Debt Steadily
Maybe your wedding put you back some, or you traveled a lot in your 20s before the kids came along. Perhaps you’re still paying off those student loans. Whatever the case, pay down your debt steadily. If you have credit card debt, pay off the highest interest rate cards first to avoid falling victim to bad credit or sky-high payments each month.
Just like you wouldn’t place all your bets on one hand at the casino when you have a family, you shouldn’t put all your eggs in one basket when it comes to retirement assets. Pigeonholing your savings to one type of account or just one stock increases your risk of loss, severely limiting your ROI. That’s why asset allocation is critical. Many factors play into how aggressive you get on your portfolio, including your age (the younger you are, the easier it is to play it safe in the stock market) and your tolerance for risk.
Finding a stock broker and financial planner you trust is a big part of developing a sound financial strategy for your family. But not everyone has your best interests at heart. Don’t get burned by a professional who claims to be managing your funds wisely. This is why every person should know a securities fraud lawyer just in case. Call Thomas Law Group today to find out how we help families recover investment loss.