Ultimate Business Guide
Get savvy about saving
By Megan Malugani
If you decided to read on after glancing at this article's headline, chances are you're not a super-saver or a senseless squanderer, but somewhere in between. You're no doubt saving a little for your future, but you could be doing more. Donna Layton, a financial advisor for Edward Jones (1530 Greenview Dr. SW, 289-0829), offers advice on how to save more now, enjoy more later.
Just get a plan, man.
Your to-do list is probably miles long already, and we feel for you. But like it or not, we're going to bump one "so-important-it-can't-be-neglected-any-longer" item to the top of your list anyway: financial planning. It's just plain common sense to have a solid financial plan in place that can not only provide you with security in your future, but with peace of mind now. "If the average person puts away $100 a month—the equivalent to going out to eat one time at a nice area restaurant—
and invests it for 20 years at a reasonable rate of return, they would have almost $55,000," Layton says. This sum would more than double the $24,000 they had put in to the account. Setting up a mutual fund or Roth IRA, for example, is a "way to have some money set aside that you could easily just spend away if you don't 'pay yourself first.' It accumulates nicely," Layton says.
Keep an eye on your investments.
Once you do have money stashed away, you've got to review the performance of your investments (especially your
401(k) plan) yearly. Put an annual reminder in your BlackBerry or on your calendar, Layton says. "So many clients think they're doing the right thing by putting money into a 401(k). But you're not doing yourself any favors if it's just sitting there. It needs to be actively managed," Layton says, and also rebalanced when necessary. In your annual review, look at what type of funds are right for your age, your risk tolerance, and your personal situation like marriage, divorce, job changes, expenses, and kids, for example. And by all means, be a participant in your
company's 401(k) plan, especially if your employer offers any sort of matching contribution. "Even if the matching
contribution is not as great as it used to be, it's still free money. If your company has a match, it's a no-brainer," Layton says.
Consult with a professional.
Layton notes that many average Joes and Janes are intimidated by the idea of working with a financial advisor, wrongly assuming that only wealthy people hire them. But everyone should feel comfortable seeking help from an expert, Layton says. "I have clients who come from all income
brackets, and I think most financial advisors do. They're for everybody," she says. "It should be about what your financial goals are. No matter how much money you make, you probably still want to retire someday."
Don't put all your eggs in one basket.
Financial advisors stress "diversification," meaning that you should mix up and spread around your investments.
Although diversification does not guarantee a profit or protect against a loss, it helps increase your odds of positive
returns. "For instance, what if someone had all their investments in company stock and worked for Enron? When
the oil industry goes south, they're in trouble," Layton warns. The message of diversification is hard to swallow for
some clients, because people tend to get emotionally tied to their investments. "Sometimes it takes a professional
to give that advice. It isn't always necessarily what someone wants to hear, but they need to be aware of it."
Keep the faith.
The current scary economic climate has prompted some folks to wonder if the best place for their money is under their pillow or hidden in a coffee can. In fact, Warren Buffett and other financial gurus say (in essence) that the best time to buy is when everyone else is selling. "Investing is about
time in the market, not timing the market," Layton says. "Long-term investors who have stayed the course through the ups and downs of the market have historically been rewarded for their patience."