By Shayna Mace
Your money can seem like an abstract concept when a paycheck hits your bank account or you send money via Venmo. (And does anyone accept cash anymore?) But keeping on top of your finances is important — just ask Rachel Haberman, a certified financial planner and assistant vice president with Wealthspire Advisors.
Here are her tips to get in your money momentum groove.
JUST DO IT
Haberman says pushing yourself to start saving is key.
“A mentor shared with me, even if it’s $5 or $20 a month — just start [saving]. And it made it so much more attainable because … I can put $5 in my savings account or $20 — or whatever the amount is — that’s comfortable [for me],” she explains.
Once it becomes a habit to auto-transfer money from each paycheck (or monthly) to a savings account, it becomes easier, says Haberman. Doing so also keeps your savings separate from your spending money, so you won’t be tempted to spend it.
“Once you’ve developed a habit of saving, you can slowly increase that saving amount and push yourself to save more. That is how I developed a savings plan. I just was never a good saver before that. If it was in my checking account, it felt like spending money!” says Haberman.
MAKE IT AUTOMATIC
“The biggest mistake I have seen [people make] is not participating in their employer-sponsored 401k plan … [or] not [setting aside] enough to get their company match if they have a company match.
So, they’re essentially leaving money on the table every year,” she explains.
A lesser-known hack she points out is to automatically funnel more money into your 401k annually if you get a raise.
“When you do your contributions, [there is an] option for you to turn on an auto-adjusting feature where [yearly], when you get your raise, it can bump up your contribution 1%. If you’re currently [setting aside] 5%, it’ll bump it up to 6% … Let’s say you get a typical 3% raise every year. A percent of that is [now] being included in your savings so that, as your pay increases, your savings increases.”
ELIMINATE LIFESTYLE CREEP
Lifestyle creep occurs when your spending increases as your income grows. Haberman says that if you get a typical 3% raise each year but don’t adjust your savings accord- ingly, you might end up spending that extra income instead of saving it.
“If you end up spending all of that 3%, you have become accustomed to a lifestyle that your savings [rate] is not going to keep pace with,” she says.
Over time, this can add up to less savings and flexibility in the future.
“[Be] really disciplined about saving and know that you’re setting yourself up for future success — and that making small sacrifices now has enormous impact in the future. [It] provides you so much more flexibility down the road … ” Haberman says. “Whether it’s flexibility in retirement to travel, or … to change jobs later in your career because you have a good retire- ment bucket — it can completely change [your] trajectory by being disciplined.”
KEEP GOOD RECORDS
Haberman recommends jotting down all of your assets, liabilities and accounts in one place (she uses a spreadsheet). This is crucial if you’re in a partnership and one partner is more hands-on with your finances than the other.
Haberman says many clients will put together a personal financial statement that has the following information in it:
- Assets (businesses, properties, items)
- Liabilities and loans
- Passwords and logins for credit cards and bank and investment accounts
- Contact information for their professional network, such as investment advisors, accountants and lawyers
If you or your partner work with an investment advisor, accountant or other professional, Haberman suggests that both of you attend meetings together.
“[Frequently] we’ll have clients where only one of them will join us for meetings, [but] … attending those meetings, even though it’s not of interest or doesn’t seem relevant, helps you to be familiar with who your professional network is [if] something does happen,” says Haberman.