SAVANNAH, Ga. (WTOC) -October marks National Financial Planning Month. Whether you’re saving up for college, a new home, or retirement, experts say it’s important to make sure you have a plan in place.
“There’s nothing wrong with just saving as much as you can for as long as you can, but this kind of strategy can easily be sidetracked by short term goals," Kyle Powers, Director of 401(k) Advisory Services with The Fiduciary Group said. "Financial Planning is incredibly important because it allows us to identify our short term and our long term goals, and more importantly, to prioritize those. That allows us to prevent those short term needs, those things that come up, from crowding out those long term goals. I recommend writing them down so that you can be held accountable to them, and additionally, it allows you to choose the accounts that are most appropriate for the goal that you’re saving for.”
Powers says the strategy for any financial goal should start with a simple calculation.
“Every long term savings goal has to start with a budget. You need to determine what your inflows and outflows are. Determine what your discretionary expenses are versus your non-discretionary. And really what that means is the difference between your needs and wants in your budget. Because ultimately, you’re probably going to have to find some of those areas where you can trim down those expenses so that you have additional dollars to contribute towards those longterm goals.”
He advises that you avoid looking to your retirement account as a source of funding.
“Ultimately, they’re hurting themselves over the longterm, and it’s a really expensive way to get money out of your accounts to then fund that other nearer term goal. A lot of taxes, fees, things like that. The biggest mistake people make in determining a retirement plan is failing to prioritize it enough.”
And it’s a good idea to keep some money ready for any unexpected costs that pop up.
“You should always have three to six months of savings available. If you don’t take care of this up front, every little financial hiccup along the way can derail your long term plans and continually set you back.”