#JAKWellness12 Week 7: Saving and Investing Your Money

Happy Monday everyone! I have to admit I am REALLY excited about today’s post. Last week I sat down with my financial advisor Kevin, while he answered your questions about saving and investing your money. I was sitting there in the coffee shop typing like a madwoman because Kevin was dropping SO MUCH wisdom you guys. He’s been in the financial planning business a long time and while he has a lot of knowledge and advice about investing money, he also great experience working with people and seeing how money affects their lives and relationships. I certainly left the meeting with a lot to think about and some tips from Kevin that I plan to incorporate in my own life and relationship.

In terms of checking in from last week, I have to confess, I didn’t fully finish last week’s challenge. I’m in the middle of trying to wrap up my finances from last year in preparation for taxes and honestly it’s a bit of a mess. I really need to have a better system for this year. Kevin suggested going through all my transactions (and also doing all my bookkeeping) once a month, so I plan to do that going forward (right now I barely do it every quarter). I use Quickbooks but I recently saw this post from Remi about organizing your expenses and I think I’m actually going to use her spreadsheet! Also, thank you to Brooke, a reader from last week who posted a comment sharing an app she uses called Daily Budget. I haven’t downloaded it yet, but for those of you looking for something to help you budget this looks like a good solution.

You guys submitted so many great questions that I decided it would make the most sense to break them up into a few different posts. Since Kevin is a financial advisor, most of the questions and answers today will focus on investing. I will do follow up posts on budgeting your money, taxes, and building credit. This week’s challenge is ALL the way at the bottom of this post (it’s a long one but worth taking the time to read). 

I want to start by sharing a quick bit of information about Kevin. I met Kevin through my Mom, who also works with him as her financial advisor. Kevin also advised my grandmother and several other family members so I was lucky to find someone I felt comfortable with and knew I could trust (and who was willing to take me on as a client). Kevin is a Certified Financial Planner and Certified Divorce Financial Analyst. He helps clients with financial planning (for individuals and small business owners), college financial planning and financial advice for clients going through a divorce. So to sum it up, he’s seen it all, and I am so thankful for his time last week to help all of us reach our financial goals.
J: What is the difference between a financial advisor and financial coach (I asked Kevin because I think a lot of your questions were best suited for a financial coach and I think it’s important to know the distinction)?

K: A financial advisor takes care of the formal aspects of personal finance, advising on investments, financial plans, etc. The nature of a financial advisor ends up being a bit like a financial therapist without a therapy license. (After spending an hour talking to Kevin, it really did feel like a therapy session by the end, haha!). 

A financial coach works more with the relationship of the client to money. It’s a more holistic part of personal finance, dealing with debt, spending habits, how the client spends their money, etc.

J: Where do I begin looking for a financial advisor?

K: Make sure they are a certified financial planner. They should work on fees not commissions. You can start by asking your parents (this is what I did, I realize this is not realistic for everyone but finding someone through a referral is always helpful). If you’re just starting you probably don’t need constant, ongoing advice, but someone who could sit down and give you a checklist to conquer for the year. Someone who is willing to do it on a yearly review or one meeting guidance consultation to start is great for those new to investing.

J: Investing, where do I begin?

K: Start with your company sponsored plan especially if they have a match (that is essentially free money). If your company doesn’t have a 401k consider a traditional IRA or a Roth IRA. If tax deduction is not that important to you, millennials should consider Roth IRA, because the earnings are tax-free later on for retirement. Tax-free anything in the future is going to be important. For many companies. Even if you are in a 401k, many company sponsored plans have a Roth 401k component as well.

J: What retirement advice would you give for self-employed individuals?

K: If you’re able to contribute more than $5500 to an IRA (per year) there is a special kind of self-employment IRA, called a SEP IRA that self-employed individuals can use to save more than that. Generally its about 20% of your take home income. The benefit of that is it’s discretionary, meaning if you have a bad year you don’t have to contribute at all, and you can contribute right up until you file your taxes. It’s also a very easy account to set up. Later if your income goes way up there’s a solo 401k where you can contribute even more, but that’s only worth it if you can contribute over $10k a year.

J: How will any of us ever be able to retire?

K: With retirement planning it really depends on lifestyle, when you’re going to retire, it’s not just a number. For every generation there’s that worry. People of our generation may never “retire” in the same sense that our grandparents did. Lifestyles are different. It’s hard to imagine earning three times what you’re earning now, you want to save what you can based on the resources you have. When you’re young you have so many competing goals, family, business, travel, debt, etc. Keep a balance between all of that. Know that for younger people time is your best friend. If you’re putting a little bit in every bucket you’re doing ok. Starting earlier is better. Student loans are going to make it harder, but 20 and 30 year olds today are much more money savvy.

J: What are the pros and cons of combining bank accounts after marriage? Especially if one partner makes much more money than the other.

K: Pros – Both spouses are aware of what’s going on in the family finances. It’s very important to have open communication and agreements about money. If they’re separate, you have the issue of who’s paying for what. When there’s such a disparity of income, over time there can be differences of opinion about who’s contributing what to family finances. There’s more of a sense of partnership. One of the biggest problems in a marriage occurs when there’s not open communication and agreement about money matters.

Cons – Sometimes one can feel a little less sense of independence, which can be hard for people used to calling their own shots.

The key is open communication and access. Not having that can contribute to feelings of suspicion, having it helps keep one another in check. Having a joint account helps in not creating that element of mistrust or suspicion. If you have no idea about your finances in your marriage you are vulnerable. It’s important and crucial to know what’s happening. There’s usually a “financial” spouse that handles the money but both should be aware. There should be a monthly review of your finances. Both people should have input and agree on how the money should be spent. Now and then a money fight is ok.

J: Paying off Debt vs Saving for Retirement

K: Balance in finance is important. If possible, try to extend as much as possible the payment period for student loans, consolidate them and try and contribute to retirement as well. Hopefully what you’ll earn in your retirement account over time will be greater than what you pay on your student loans. Retirement earnings are tax deductible so don’t give up on retirement savings in lieu of paying off student loan debt. If you can contribute to your company with a company match that is ESSENTIAL. The match is free money.

J: Should I consolidate my student loans?

K: If you can consolidate at a fixed rate do that. SoFi is one of the better companies to do this, but you need good credit. Extend the term of a consolidated loan as much as possible to give you flexibility. You can always pre-pay or pay more. Life happens, if you’re in a cash crunch you don’t have a huge shorter term loan payment to make.

J: Savings vs Investing

K: Pay your bills and have a safety fund, but try to contribute at the very least 5% to your 401k (5% is a minimum baseline when you’re starting out and don’t have a lot of wiggle room with your budget). Think hard about where you’re spending. A 401k is great because it’s forced savings. We all tend to live on what we get in our paycheck, so you have this invisible genie taking away the 401k plan money, it’s a forced saving discipline. Start out slow. If you get a raise see if you can do a little more.

This Week’s Challenge

For this week, the challenge is to either start or optimize your retirement planning. If you have nothing at all, get started by looking into your company’s plan or starting your own (a SEP IRA, 401k or ROTH IRA). If you can’t start that yet, look into a savings account that earns some interest (this is a good place to start).

Continue (if you haven’t finished) working on pulling together all of your finances and creating a budget for yourself. More to come on that! Check out this post from Remi about organizing expenses, and this app looks great as well.

And last, challenge yourself to spend less. Skip buying a few coffees and make it at home, cook dinner instead of eating out, think twice before making a purchase. Be thoughtful about where you are spending money.

A huge thank you to Kevin for his thoughtful advice this week. Good luck everyone, we got this.

21 Comments

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  1. Cate R. says:

    Thanks for the great post Jess! I’ve been thinking hard about retirement savings this year and doing a lot of research into Roth IRAs. It turns out that the “year” of investment for a Roth IRA is April to April (not Jan.). So it’s not too late to invest for the 2017 year- the formal cutoff date being 04/17/2018. Hope this helps so other readers get excited to start saving- time really is your best friend with compound savings 🙂

  2. Shloka says:

    A great post – so informative and something we all need right now!

    x
    Shloka
    http://www.thesilksneaker.com

  3. mackey says:

    Great post! Just a hard thing to discuss. I’m excited to start looking at ways to my savings. Definitely going to try that app.

  4. Katie Gill says:

    Great post, and super informative! I recently opened a Roth IRA through Vanguard (they do have a minimum of $3,000 to sign up, but are one of the lowest with fees) My goal is to max it out this year, which will be a good chunk of change each month but seems worth it. I try to think of it, that in a few years I might not be able to max out due to buying a home ect, so right now – being in my 20’s I want to max it out, because it has the longest chance to grow.

    I am excited to check out the apps for budgeting and recording finances. I like that idea of sitting down each month and doing it. I also have Quickbooks too, but I don’t love it – and I know its more work but I think I might try to just organize it myself, because it will make more sense to me. Have done it for January and so far in February, I notice I do think twice about spending money on certain things.

    Excited to hear more next week!

  5. katy says:

    thanks so much for this post! compounding interest is an amazing thing!!

  6. Sam says:

    Love this one, I’ve already got everything checked off of this list (I’ve got a lot of relatives in finance and I went to school for business so I’m really good with numbers). Right after I had my baby, my partner and I started a joint fund for our daughter which we both contribute towards. We did NOT put it in her own name because our financial adviser told us that once she hits 18, she will be able to touch that money without our consent, so we decided that it would be best if we did not put it in her name.

  7. Corrie says:

    Thanks so much for this. I’ve just downloaded Daily Budget and am feeling pumped!

  8. Christina says:

    I thought it would be super overwhelming to gather all of my information into a spreadsheet, and even though it took a while, it was actually sort of empowering to have it all together. I need to work on a real budget that I’ll stick to – that’s next! Thanks so much for culling all of this awesome input from Kevin!

  9. Amanda G says:

    I really enjoyed this post, especially the question about combining finances after marriage.

    Over the past week I review my spending in January and set my budget. I plan to review my spending every one to two weeks at first, and then monthly once I get into the groove.

    Oh and thanks for sharing the Daily Budget app, I’m going to go download that now!

  10. Anne says:

    I loved this! Especially the part at the end about challenging yourself to spend less. I’ve actually started tracking days when I haven’t spent money at all! When I make the decision to think about where my money goes, then I feel more financially confident. I’m definitely going to look into the Daily Budget app!

    Thank you!!

  11. Erin says:

    Budgeting is something I always try to avoid because I LOVE to shop ha. I started a Digit account which helps me save money and I opened an additional savings account into which I deposit some of my paycheck each month. I also plan on increasing the amount which I contribute to my 401k. I definitely still should make an excel spreadsheet which my monthly expenses, but I’m a little scared to see my results haha. That’s on the agenda for this week, so I need to just buckle down and do it!! Thanks for all of the helpful info. Love participating in the challenges each week 🙂

  12. Kayla says:

    Thank you so much for this great advice Jess! My parents always instilled in me to save save save! Starting out from the age of 21 I have invested 10% into my 401K with a great company match. Now that I’ve changed jobs recently I’ve dropped that percentage, but plan on increasing it again during open enrollment.

    I definitely need to be better about watching what I spend and where I spend it. I’m going to attempt to go an entire month without purchasing anything unnecessary (clothes, shoes, jewelry).

  13. Laurie says:

    Great insight! Getting my finances in order is one of my big 2018 goals. My budgets are in place, but this post might just give me to push to start a 401k, especially as I started a new job this week. The matching IS a no-brainer! One tool I love it Mint.com. You link all your accounts (cards, loans, etc) and it offers a great overview with budgeting tools. Check it out if you need to. I think it’s more intuitive than spreadsheets. As always, terrific content!

  14. MELISSA says:

    Still working on the budget, but I am downloading the Daily Budget app right now! I need to get my 401K in order — I have a few different accounts from different jobs, so my goal by the end of the month is to get everything in one place.

    Sidenote: reading everyone else’s comments made me feel suuuuuuuper behind and uneducated about this. But I know I have to run my own race and not compare, so I’m happy with the steps I’m taking for now 😉

  15. Jherell says:

    Great insights! For last week’s challenge, I took a closer look at my finances/budget, and I put all of my expenses in a Google Doc (probably should’ve used a spreadsheet). Nonetheless, it’s been very helpful!

    I’ve been meaning to focus more on retirement planning, so I’m looking forward to this week’s challenge! And I’m also trying to be more thoughtful of how and where I spend my money – it’s a struggle!

  16. Hannah B says:

    Thanks for such an informative post about a topic a lot of people are REALLY afraid or embarrassed to talk about. It motivated me to get working on setting up a Roth IRA as my company currently doesnt have a 401K.

    I also started using this app called Acorns that takes all your linked credit cards or accounts and rounds up your purchases to the nearest dollar. I was able to save enough money through the app in just a few months to pay for a vacation!! https://www.acorns.com/invite/?code=3L7QHL

  17. Bitsy says:

    This was very helpful! And I feel like I am on the right track. Last week (I didn’t complete the full challenge) I looked at my current 401k contributions and they are good but I know I can contribute more. This weeks challenge fits right in with that!

    Looking forward to more advice from Kevin! Thanks!

  18. Brittany L Cerminara says:

    Great post! In an attempt to save more $$ for travel/savings, my husband and I tried to limit our dining out at the end of last year. Honestly I don’t miss it very much – we’ve tried to do day dates and other activities rather than a big dinner and drinks on Saturday night!

  19. Heather Thompson says:

    I have been so focused on getting better with money lately, so this is right up my alley. I already contribute to my 401k but I desperately need an emergency fund. That means it’s time to stop spending so recklessly on frivolous things!

  20. Nancy says:

    Yes yes yes! This is so informative and helpful. Challenge for this week already done! I am feeling like now is the time to get on top of my finances, and I could not be more thankful for your challenges basically forcing me to do so!

    Thank you to Kevin, for sharing so much knowledge!

  21. Elizabeth Jones says:

    This is some great information! I’ve been concerned about being able to save while also paying of debt so I really appreciated Kevin’s insight. Last week I actually went ahead and did my takes so I’m feeling pretty good about staying on top of my finances this year. I ‘m also going to download the daily budget app to see how i like it!