One thing that I love about my work is that I have the opportunity to witness people in all stages of their financial journey – setting goals, achieving them, and enjoying the fruits of their labor. This perspective serves me well in one of my most important roles as a financial planner: the advocate for your future self.
If you’ve ever worked with me, we’ve probably chatted about doing things that Future You would be thankful for. As we come up on Thanksgiving, I thought it would be good to look at financial moves people can make that they’re thankful for down the line – whether that’s 5, 10, 20 or 40 years down the road.
Although everyone’s financial plan is unique, here are a few moves you can make right now to do Future You a solid.
1.Take Care of ‘Current You’
Did you expect me to say save? True, saving is important, and I’ll say more on that later, but saving is a lot easier if Current You is living a fulfilled life. Being fulfilled doesn’t necessarily require a lot of money, but it does require identifying your core values and ensuring that you are working toward getting more of what you truly value in life.
Spend some time thinking about what is most important to you. Core values are something we work on identifying with our planning clients, but there are lots of books and internet resources that can help you work through this process on your own as well.
Taking care of Current You can be anything from exercise to therapy to investing to exploring different things you may be interested in to just plain having fun.
2. Set Tangible, Value-based Goals
And then save for them with intention. Saving money for the sake of saving money is hard because the immediate, tangible benefit of spending money will pretty much always be greater than the desire to save intangible dollars for some unknown future time.
That is, unless you know that those saved dollars are going toward something specific and in line with your values – say, a vacation exploring somewhere new with special friends, or a home where you can make memories with your family.
If your goals are in line with your values, then you will be much more likely to stay motivated to work toward them.
3. Create a Budget and Monitor It
The b-word has become a dirty word with connotations of being restrictive and stifling, but in reality, a budget is a tool that helps set people free – especially if the budget is aligned with your core values.
When you have a spending plan in place that balances the needs and values of Future You and Current You, spending decisions become so much simpler because you have a clear idea of how your cash flow is structured to meet your needs. Not only that, but knowing exactly how much it costs to be you will give you additional confidence to make other big decisions like moving (even moving internationally), changing careers, retiring or starting a family.
A budget starts with just two inputs: how much is coming in and how much is going out. If you can consistently keep the first number higher than the second, then you’ll be in good shape.
4. Tax Planning in Low-Income Years
If you are in a low-income year (or phase of life), you can make some moves now to take advantage of your lower tax bracket, which could save you a lot in taxes down the road. Some examples of things you can do are Roth contributions, Roth conversions and capital gains harvesting.
These strategies can be especially beneficial if you are young, and/or if you are in the retirement sweet spot—the period of time between when you retire and when you start drawing Social Security, required minimum distributions and pensions. The exact strategy you choose will depend on your unique situation, so it would be wise to consult with a financial advisor or CPA to help you come up with some strategies.
5. Invest and Stay Disciplined
Did you know that the best predictor of investment success is length of time in the market? Investing early allows you to take advantage of compounding returns and long term market growth. Be sure to choose a well-diversified, low-cost portfolio and stick to your investment plan through the market ups and downs. Eventually the returns on your investments will be doing the saving for Future You, without you really having to do a thing!
Putting a solid financial plan in place early on will have lasting downstream effects that could make a world of difference in the financial situation of Future You. Making sure your financial plan is solid may mean asking for advice—a step a lot of people struggle to take early on (and really regret not doing later on).
Consulting with a qualified financial life planner can help ensure that you have a tax-efficient investment plan, with the appropriate risk exposure for your current goals and risk profile. Not only that, but they can help you find balance between the needs/wants of Current You and Future You so you can save successfully without sacrificing too much for a future that is not guaranteed.
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