I came across a great quick read recently titled “5 Biggest Financial Mistakes Gen X and Gen Y Make“.
We agree with most of these, and the literature would back it up.
The list is short, and seemingly obvious, but time and again folks have to re-learn things like the importance of starting to save early.
1. They Don’t Get Professional Help: This is common – and we think hiring professionals makes all kinds of sense, whether it’s time to re-wire a bathroom, put braces on your kids’ teeth or seek professional investment advice. We work hard to keep fees low, transparent and aligned with our clients so it is easy (fun, even) to work with us at KilterHowling.
2. They Lack Savings: There are no shortage of graphs and charts showing the value of compound interest. Plus, even learning to siphon off a little bit of money early on starts a habit that can last a lifetime. We meet a lot of people assessing whether they are on track or are able to retire – not many say “Dang it, I saved too much”. Save a little early and often; it feels great!
3. They Don’t Take Full Advantage of Employer Match: If you can get a match, and you read #2, then take the free money. An employer match is free money to help you save for retirement.
4.They Are Saving Only in Their 401(k): This is a great point – 401(k) (and IRA) monies are tax deferred and may carry employer matches, but they are also not accessible without a penalty before age 59 1/2. Also, by age 70, one has to begin taking required minimum distributions. These are taxed as ordinary income and, if you’re still working in retirement, can carry a whopper of a tax bill. Diversify savings among taxable and tax deferred, rainy day fund, medium-term saving and long-term retirement planning. An advisor can help with this.
5. They Don’t Invest in Stocks: Stocks can be a wild ride, but consistently over the 200+ years of stock market data we have to work with, stocks have provided higher rates of return. Investing in stocks early puts time on your side. Working with the right advisor will help you decide to allocate between stocks and less risky investments as situations change and adapt. And finally, at KilterHowling we think it is very important to work to temper the volatility and downside risk of stocks to prevent clients from selling at market bottoms and chasing stock returns at market tops. Back to #1: professional help – good quality, well aligned professional help – is a great place to start getting your financial life in order.