You’re investing for retirement, paying off debt, building up an emergency fund, saving for your kid’s college, and checking all the top financial boxes—now what?
If you’re running a surplus each month, it’s so easy to simply funnel money into the basics (401k, IRA, etc.) but is that the best way to truly maximize your resources?
Instead of putting more money into familiar avenues without a clear strategy, we challenge you to be deliberate with your next dollar. By doing so, you open yourself up to many opportunities and create a well-rounded financial plan.
Get ready to be deliberate with your dollars, and learn how doing so can help you reach your goals.
The First Step? Define Your Goals and Make Them S.M.A.R.T
You can’t be deliberate with your money without understanding your goals.
An excellent place to start is to make your goals S.M.A.R.T.
- Specific
- Measurable
- Attainable, achievable, and actionable
- Realistic and relevant
- Time-based
Here’s an example of a deliberate, S.M.A.R.T goal.
Save an additional $200,000 for a down payment towards a dream vacation home in 5 years.
Given the level of detail, you can break this down and assess that you’d need to save $40,000 per year (or $3,334 per month).
Beyond the dollars and cents, you will need to undergo several pre-planning steps to make this goal more personal and gratifying to you. You’ll want to determine how much house you can afford (and want to spend), how often you plan on using the property, if you want to rent it when it’s vacant, etc. You can also look at other assets beyond monthly saving and investing to help you reach your downpayment goal.
Additionally, you’ll want to consider the best strategy to build the wealth required to attain your goal. In this example, a 5 year goal isn’t necessarily long-term, but it isn’t short-term either.
Perhaps you wouldn’t invest the funds as aggressively as you would for a longer time horizon, but you may want more risk than in something like your emergency fund. Your advisor will be able to help you craft a plan that’s unique to you.
You can repeat this process for any of your financial goals—investing for retirement, participating in a likely business or equity opportunity, giving to charity, planning for health care expenses, etc.
When you define your goals into deliberate steps, your path to achieving them becomes much clearer.
Once you create a solid plan to reach your goals, what can you do with any leftover funds?
Maintain Financial Accessibility To Fund Future Opportunities
Once you’ve hit your stride in your 50s and reached your peak earning years, it can be easy to fall into a bit of complacency when it comes to your money. You’ve been a diligent retirement saver, college planner, and debt slasher, but what about other avenues for building wealth?
There’s a whole world beyond your bread and butter personal finance goals—retirement, debt, emergency savings, etc. Once you’ve successfully laid the foundation, you have the unique opportunity to take your wealth a step further and maximize the resources working for you, aka being deliberate with each dollar.
But if you want to take advantage of potential opportunities that may come your way like participation in a business venture or employee stock purchase plans (ESPPs), exercising stock options, engaging in Roth conversions when appropriate, taking much needed sabbaticals, etc. you need to be able to access your money.
These more unique experiences and opportunities can leave people realizing that much of their resources are tied to illiquid investments.
If all of your funds are stuck in retirement-sheltered accounts or your home’s equity, you don’t have an efficient opportunity to use those funds to continue your wealth building journey.
Let’s look at an example.
Without access to your money, it’s often challenging for people to take advantage of opportunities like stock options and Roth conversions, for example. Typically, both ventures require liquidity to pay the tax liabilities that follow.
Your wealth should allow you to take advantage of opportunities, but it can’t do that if it’s handcuffed to your 401(k).
How To Save With Accessibility In Mind
There are so many ways you can intentionally save for the future besides retirement accounts and cash. Let’s look at a few:
- Brokerage account. This account offers a lot of flexibility before and during retirement, and can help you build wealth as you grow instead of your money remaining stagnant in a traditional savings account. You may not know what you’ll use the funds for exactly, but saving in this way gives you permission to say “yes” when a valuable option does come around. They can also make for better tax planning in your retirement years since you’ll have more control over what proportion of living expenses are funded from qualified vs non-qualified accounts.
- Roth IRAs. You can use funds in your Roth IRA for several goals—retirement, college, first-time home purchase, birth/adoption costs, and more. While you see maximum benefits to a Roth by allowing it to grow tax-free, tapping these funds under the correct circumstances doesn’t carry the same sting as tapping a traditional retirement account.
- Health Savings Account. You can build up funds in your HSA to cover medical expenses. The best part? HSAs come with triple tax benefits: pre-tax contributions, tax-free growth, and tax-free distributions for qualified medical costs. You can even invest the funds in your HSA and keep it growing each year. You may find you’ll need it to supplement Medicare costs or other unexpected medical expenses along the way.
Building wealth should expand your horizons, not dim them. You open yourself up to several future possibilities by investing each dollar deliberately.
We’re not saying that saving for retirement and college is wrong; rather, it’s also essential to have a well-rounded balance sheet to help achieve other financial goals efficiently. You don’t want to find that all of your net worth is tied to your retirement accounts that you can’t access without penalty or a steep tax liability.
What account should you consider if you want to save more? Read on to discover various avenues for extra savings based on your goals.
Work With A Financial Team That Prioritizes Your Goals and Helps You Reach Them
Our firm takes the time to understand you—your goals, values, and priorities—so we can build the most deliberate strategy to help you hit those milestones quickly. Our approach is holistic and aimed at guiding you towards the life that brings you joy and fulfillment.
We do this through comprehensive financial planning that leaves no stone unturned. With us, you can find confidence in every area of your money, like goal setting, cash flow management, estate planning, investment management, risk management, and so much more.
After we thoroughly understand your needs, wants, and wishes, we can help devise different funding strategies and opportunities. For those who perhaps have too much “extra” cash flow each month, we can identify efficient savings options that keep your money working for you, plus accommodate your goals.
But what if you don’t have any leftover funds in your cash flow plan each month? We can take a look to determine if you need more breathing room and devise a better balance to help you meet more non-retirement goals. Additionally, we’ll consider any tax implications of making such adjustments.
With us, you don’t have to be the expert. If you know what you want, we will help you get there.
Your Wingate Wealth Advisor team can help you execute the most effective strategies for you. Contact us today.
