Empower Blog

woman looking over her finances
July 25, 2022

Retirement Planning Part 1 – Taking Control of Your Finances

Financial Planning
This article was recently published in CommunityAmerica's "Let's Talk Money" section of the Kansas City Star.


Retirement planning is the process of determining your retirement income goals along with the actions and decisions necessary to achieve them. It may seem like it’s a ways away, but there are things you should be doing now that will significantly help you prepare for retirement. Your plan may change over time as you continue to grow throughout your career but beginning to build your financial cushion as early as possible will cause you less stress in the long run.

Before you can dive into the specifics such as which type of retirement account to use or how much you should be investing, it is crucial that you have a basic knowledge of your finances; from your current spending habits to where those habits are taking you and how to maximize your financial potential. Follow these three tips to get your funds in order now to ensure financial peace of mind in retirement.

Understand Your Money & Where It Is Going

Retirement planning begins with thinking about your retirement goals and how long you have to meet them, but you cannot plan for the future without understanding where you are at right now with your finances. Understanding your money is all about knowing how much you have coming in each month, what bills and debts you need to pay, and how your spending habits are affecting your financial potential.

Maybe you just opened your first credit card or recently started your first “real world” job and received your first paycheck. Having funds on hand that you are not used to having makes it easy to get caught up in spending money on things that are not needed. Falling into the trap of getting Starbucks every morning or going out to lunch with your coworkers every day can be a slippery slope that you might not realize is hurting your potential for successful retirement.

For example, say you purchase a $5 coffee every morning. That adds up to $35 a week and over $1,800 per year! If you saved that $5 each day instead of buying coffee, you would have $36,000 in 20 years for your retirement – and that doesn’t consider how much you could earn on investing those funds into a retirement account. Check out our Retirement Savings Calculator to determine how much more you’d have at retirement by beginning your savings plan today rather than waiting.

Control Your Money

Now that you understand where your money is going, you can better control how you spend. Do you hope to purchase a car, buy a house, or make a sizeable investment in the near future? One huge factor when starting retirement planning is being aware how much debt you are carrying along with you. It is very important that you strive to have as little debt as possible. That means paying off costly credit card debt or those pesky student loans can make all the difference when you finally reach the point of retirement. Getting your debt paid and out of the way, while also borrowing as little as possible down the road, will be a huge burden off your shoulders in the long-run.

In addition to controlling your debt, it is important that you create a budget – and stick to it! This is all about self-control. While you may love those daily lunch runs, cutting back to once a week, or even less, can make a big difference over time. When creating a budget it is important to ensure every dollar has a purpose. Once covering all expenses, where do those excess funds go? Whether it’s to savings, retirement, or even your “fun money,” having every dollar assigned to a specific category each month will help you from going overbudget from month-to-month.

Bonus Tip: Revisit your budget every so often, especially if incomes change or bills shift, to ensure you are making the most out of your money – which brings us to our next point.

Maximize Your Money

After you’ve got a basic understanding of your money and how to control your spending, it’s time to start thinking of the specific ways you can put your money to work to benefit you. On the savings side, we have discussed how small savings on everyday items can certainly add up. It is also worth revisiting your larger monthly expenses to find out if you could reduce interest rates or lower monthly payments on costs such as loans and insurance.

On the investment and retirement side, it is important to remember that it is okay to start small. We will go more in-depth in Part 2 of our Retirement Planning blog series, but some initial tips would be to first, start where you can. Even if you can only start with putting 2% of your paycheck into an IRA or other retirement account, that is something. You can then slowly increase your contribution each year as you build your savings, progress in your career, and (hopefully) earn raises. On the other hand, if you are able, you should most definitely take advantage of your employer’s 401k match by putting in the max amount that they will match. This is free money that your employer is giving you for your retirement.

Bonus Tip: Do not pull from your 401k if at all possible. It is easy to pull from what you’ve built to pay for larger expenses, but this could end up hurting you in the long run. Starting your retirement planning as early as possible in your career will set you up for the most success going forward, but there is definitely some work you need to do before you can start thinking that far into the future. You must have the basic understanding of your money and how to control and maximize your funds. Have questions on retirement planning or your financial future in general? Schedule an appointment to meet with one of our Wealth Advisors, check out our Empower Blog for helpful tips, and keep an eye out for Retirement Planning Part 2 coming next month!
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About the Author
scott adams
Scott Adams

Wealth Management by CommunityAmerica

Scott, a Wealth Advisor, has been working with families since 1994 and can help you build a plan to achieve financial peace of mind. He co-founded the Special Needs Planning Center.

Securities and advisory services offered through Copper Financial Network, LLC (“Copper Financial”), a broker-dealer and SEC registered investment adviser. Member FINRA/SIPC. Copper Financial is a wholly-owned subsidiary of CommunityAmerica Credit Union (“CommunityAmerica”) and makes non-deposit investment products and services available to its members. Representatives are registered with Copper Financial. CommunityAmerica and Wealth Management by CommunityAmerica are not broker-dealers or investment advisers. For important disclosures from Copper Financial please visit here.


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