By Matthew M. Glatt, CPA – Founder and CEO of FLP Financial Group, LLC
You’ve probably seen commercials or read advertisements featuring grave warnings about the possibility of outliving your retirement funds. These ads make it sound like your future depends on calling the 800 number at the bottom of the screen, and if you ignore it, you do so at your own peril. Seems a little intense and scary, right? That’s because fear and a sense of urgency are two states of mind that lead to sales and profits for the company being advertised.
It’s no secret that as a financial advisor, I also see the importance of solid retirement planning. What I don’t see is how stressing you out will help your situation in any way.
Whenever I speak with a client who seems scared, stressed, or completely overwhelmed by the prospect of retirement planning, my number one priority is removing those negative emotions from the situation. The truth is, obsessing and worrying about your retirement is not going to get you more mileage out of your money– but a systematic approach to saving and planning will.
Here are your four steps to stress-free retirement planning.
Create a Budget
Some people hear the word “budget” and automatically assume that it means “restriction.” Perhaps this is why so many individuals and families are operating their financial lives without one.
So let me begin by telling you a few things that a budget IS NOT:
- A spending plan which ignores fun. No vacations, no dinners out with friends and family, no special birthday parties, and definitely no new gadgets.
- A punishment for overspending, or mismanaging money in the past.
- A challenge to live your life in austerity. Prepare to clip coupons, shop only in secondhand stores, and obsessively hoard your pennies.
Instead, let’s talk about what a budget actually is:
- A means of finding potential savings where you thought there were none.
- A chance to take control of your finances, reducing the likelihood of an unexpected surprises (like overdraft fees.)
- A good way to plan for both short-term and long-term financial goals.
Coming up with a budget is a very important first step to reducing financial stress. It really is as simple as writing out all of your monthly income, and all of your monthly expenditures. It will help you keep track of where your money is going, and can help you stay focused on working towards your goals.
Have a Plan
Once you have a workable spending plan drawn up, it’s time to take more action. If you’re serious about getting back in control of your finances, it can be to your benefit to involve a trusted professional.
When you find a financial planner whom you trust, and who is dedicated to always working in your best interest, you might be amazed at the things you can do with your savings. Unfortunately, there is a preconception out there that only millionaires use financial planners. Not only is this untrue, it is a mindset which prevents people from seeking out the help they need.
Even if you are starting from zero, getting a financial planner on board can be a very good idea for two reasons:
- A trusted professional helping you make smart investments, can grow your savings faster than you could on your own.
- Even the most well-thought-out budgets will cease to function in the face of major life changes. A new job, a new baby, an unexpected illness, buying or selling a home, etc. could render your current budget all but useless. A professional can help you not only react to these situations, but prepare for them well in advance.
When most people talk about stress and retirement planning, their two biggest fears are not meeting their financial goals, and being unprepared for expensive emergencies. Speaking to a professional coming up with a plan can help you feel less troubled about both of these situations.
Pay Yourself First
This is an expression that many people have heard throughout their lives, and unfortunately it is advice that is often waved off as being unrealistic. Of course, this means that people begin thinking of retirement savings as some sort of unattainable luxury, and it is therefore given very low financial priority. By the time all of your bills and monthly expenses have gone out, the money that is left over is often used for “here and now” purchases and entertainment. When this approach is used, very little, if any, is left for savings.
This is backwards thinking.
Paying yourself first simply means you are placing the highest priority on retirement savings. You can work with a financial planner to figure out the particulars of how much you should be contributing, how frequently, and what type of savings plan is best for you – but the bottom line is that by paying yourself first, you are avoiding stress by creating good habits.
Find Time to Relax
As I said in the introduction, nothing is to be gained from stress. A healthy concern and respect for your retirement savings is one thing, but an all-consuming fear is quite another.
People who are overly stressed about money tend to make poor decisions. They may try an unsustainable restricted budget, they may take too many (or even too few) risks with their investments, or they may become so frustrated that they give up on retirement planning altogether.
Sometimes it is okay, and even healthy to take your mind your money for a while. And you can do that if you are confident in the fact that you have a workable plan, attainable goals, and professionals working in your best interest.
It can be very difficult to feel good about your retirement prospects, especially if you are short on funds. Part of my job is to take people of all income levels and all backgrounds, and help them pursue the most comfortable and stress-free retirement possible. These four steps are great place to start, but they only represent the beginning of your journey. For a more in-depth look at how to plan your retirement without stress, please download our free guide “The Family Budget.”