Today I’m going to be writing about something that most of us probably don’t think about as often as we should: financial planning.
Disclaimer: I am very sensitive to the fact that all of us around the globe are facing unprecedented levels of uncertainty about what the future holds. The intention behind writing this blog post is not to preach on how you should live your life or how you should invest, it is to shed light on something that many of us avoid, whether out of fear or simply just not knowing how to get started. I know from experience and talking within my own social circle that this is a topic that many of us never get around to.
My intention is to encourage you to come out of this tough time stronger than you were before. My inspiration behind this piece is the memory of my great aunt, who inspires me everyday. With family being such an important topic right now, you’ll get to read the story of how my great aunt who retired at 50, never earning more than 55k a year, was a millionaire on paper when she passed at 84 years old. She achieved that through starting early in her career, and planning for her future, while always living within her means–advice I’ve found to be very pragmatic in these difficult times.
And while we are in the heat of one of the biggest economic downturns in our history, it seemed pretty fitting to reach out to a trusted source for some advice on how to handle this current crisis. With lockdown continuing into May it feels like the world is literally on fire. My friend LaTasha Wilson was one of the first people I called when the market started to go under.
I was lucky enough to be her friend before she got into financial planning a decade ago.
I remember, she was always passionate about financial advice, and at that time, I was someone who was on the debt diet, so I sought out her expertise to fix my personal finances.
While I don’t know what is going to happen in the future, I do know that LaTasha can help to make this digestible and a lot less scary so that we all can approach this with a clear head, and not be afraid of talking about money.
Three Tips to Getting Started With Financial Planning
One of the big takeaways that I learned from LaTasha is the importance of working with a licensed professional. If you’ve never worked with a financial planner before, now is the time.
I grew up in a home that never talked about money. To me it was a dirty word, so having someone that can help me to get really serious about my finances has been such a relief. I encourage all of you to seek out a trusted financial planner, but how can you do that?
LaTasha’s three criteria for finding a great financial planner involving three simple steps.
- Find a licensed financial planner.
- Get referrals from your family and friends.
- Develop a personal relationship with your financial planner. They should be someone that you like to work with and trust.
While the last two seem pretty self-explanatory, I asked her about other financial planners that don’t have licenses. There are many people who can give you sound advice and help you with your financial planning who don’t have licenses. She was very clear to point that out to me, but she also shared that it helps with credibility and accountability, and I would compare it to trying to sell your home by yourself.
It’s just a wiser financial decision to go with a licensed real estate agent, and financial planning is really no different.
Financial Planning is All About Trust
It’s incredibly important that you feel like you are friends with your financial planner, (in my case I am) rather than feeling like you can’t talk to them. There are few things in life that are as personal as your finances, so finding someone who makes you feel comfortable is paramount to getting the most accurate advice possible. No matter how you look at it, this is a relationship.
Even though you may not want to hear what they have to say at times, you should trust their expertise. Expectations and accountability are really important so that every client respects their financial advisor’s opinion.
LaTasha suggests that you trust your financial advisor as much as your doctor, if you aren’t there isn’t any reason to ask for their advice. Touche!
How to Retire a Millionaire
I asked LaTasha about one of my goals when I was a teenager. If I want to have a million dollars by 40 after graduating from high school or college, how do I save to get there? Is that still possible in today’s world?
Without batting an eye, LaTasha explained that saving $50,000 every year for 20 years is one of the easiest ways to save a million dollars without playing the stock market. At least this is what I thought when I was young. Experience proved otherwise, as being young and single in Los Angeles proved to be pretty tough on my wallet.
Keep in mind if you put the maximum amount of money (in 2020) into a 401K for instance, you won’t be able to save the full $20,000. That money is pre-tax dollars, which means that when you go to withdraw that money you will need to pay taxes on it.
Keep in mind that something like a 401K is not an emergency fund. If it starts becoming tempting to dip into your 401K, like I used to do then you need to reevaluate your other spending.
I used to treat my 401k as my emergency fund which is one of the biggest mistakes I have ever made financially. I thought I was doing the right thing by contributing the maximum amount allowed when in fact I should have scaled back on the amount and had a savings account with an emergency fund that was liquid.
My Great Aunt
My Great Aunt never made more than $55,000 a year. She lived well within her means by maxing out her 401K every year. When she retired in her fifties, she lived on her savings until she passed at 84. At her time of death, she was a millionaire on paper!
It’s absolutely crazy to me that she never earned a lot of wealth, but was still able to live comfortably into her golden years–even managing to keep enough gold to pass on to her loved ones!
What was her secret?
When I pulled all of her bank statements I found that she never touched her 401K.
When I was younger during my modeling career I put most of my savings into a 401K, which I thought would grow. However, when I went to withdraw some of that money I quickly learned that the taxes are no joke since that is all pre-tax revenue. In the end, it made me really regret not putting my savings into something else that would be more accessible.
LaTasha suggests putting away smaller amounts of money monthly, as opposed to banking on larger sums in the future. It’s easier to put $200 away every month than a huge lump sum of thousands of dollars later.
One of the biggest takeaways to consider, is that one day you may need extra care. I hope to be 70 years old in Palm Springs drinking wine in the sunshine. However, if anything goes wrong, I have a solid plan in place that gives me peace of mind.
Can you say the same, if not I strongly recommend you find a good financial planner to help you while you have a little extra free time.
Take this pandemic as a lesson that you can live on less.
Now is a great time to review your finances–everyone says that they don’t have time to think about these things, but now we all have extra time. (My husband is the worst about that.) Be forward-thinking today to make wise financial strides tomorrow.
Instead of learning a new language during quarantine, take some time to take a look at the benefits that your job offers and learn how you can make the most of this time financially.
I have always feared death, however Josh and I recently got serious and took care of our trust and our wills. We made sure that everything was accounted for so that nothing gets left to chance, should something happen.
Likewise, LaTasha recommends that if you are retiring now or in the near future, that you don’t have time for the market to bounce back to where it was before all of this happened. Instead, focus on guaranteed income that you know will help you in these pressing times.
How Much Should You be Saving?
LaTasha recommends that you save anywhere from 10-15% of your income every year, that number remains solid even during coronavirus (if you are able to).
If you hit your goals and want to save more aggressively, she suggests putting away something extra towards a retirement fund after paying off large loans such as a mortgage or car loans.
If you are reading this and still aren’t convinced, LaTasha and I have two final thoughts.
Don’t cheat yourself and don’t take time for granted.
Life moves fast. If you aren’t planning ahead for your retirement, it will be here in the blink of an eye. Never take age or health for granted. If you can’t work, you can’t save, so make sure that you are taking care of yourself and your future self by investing in your future!
If you’re interested in learning more, reach out to my friend LaTasha Wilson who will help you every step of the way.