Financial Advice From Your Future, Wiser Self

August 03, 2023

Have you ever wondered how your future self might react to the financial decisions you make now? The older, more experienced you might extend a fist bump to your younger self for participating in your employer's retirement plan. But you may get a thumbs down for racking up debt over the holidays.

Fortunately, you don't need a Magic 8 Ball to figure out what your future self has to say. There are fundamental money moves that can help you stay on track throughout your lifetime.

Consider these six strategies to help build lasting financial well-being.

Practice the 10% Rule

  • Don't wait until you have a high-paying job to save more for your future.

It's one of the most straightforward financial advice tips around. Get into the habit of paying yourself first. Earmark 10% of your paycheck toward retirement and set up automatic transfers to a retirement account. It's money you won't miss now, but you'll reap the benefits later. The earlier you begin the better. However, no matter your age, regularly contributing to your retirement savings will build wealth over time.

The best way to save more for retirement is by using tax-advantaged accounts such as company-sponsored 401(k)s, 403(b)s and 457(b)s or Individual Retirement Accounts (IRAs). Get an extra boost from a 401(k) plan, because your employer will usually match what you invest — typically from 2% to 8% of your salary — a great way to feather your nest egg.

  1. Build an Emergency Fund
  • Put your savings on autopilot.

To maintain a healthy emergency fund, set up automatic payroll transfers to a designated high-yield savings account, preferably one not connected to your checking account. Your first goal should be to save at least $1,000. Remember, this fund is for true emergencies like if your car breaks down or an appliance goes on the fritz.

In addition to basic savings accounts, many credit unions offer high-yielding savings accounts. You might also consider an account that invests in money market mutual funds. These funds are conservative solutions that invest in short-term bonds and yield a much better interest rate than savings accounts.

  1. Don't Time the Market
  • Keep a long-term perspective and stay invested.

In an uncertain economy, trying to time the stock market is a fool's errand. That's because market timing involves two precise investing decisions: when exactly to get out of the market, and when to get back in. Stay the course because your losses now are only paper losses. Make sure you have a diversified investing mix and get professional advice when you need it.

  1. Create an Overall Financial Plan
  • Make small improvements along the way to reach big goals.

A written financial plan is a complete snapshot of your finances, including all your goals, and the strategies you'll need to accomplish them. For instance, you may be saving regularly for retirement and have a robust emergency fund, but want to pay off some lingering credit card debt, or establish an estate plan. Whether you've developed a plan on your own, or work with a financial advisor, it's good to review it at least annually and adjust when necessary.

  1. Pay Off High-Interest Debt
  • Avoid the minimum payment trap.

If you're relying on credit more than you used to, it may be time to review your overall budget and create a game plan to pay off high-interest debt. If you haven't looked at your budget in a while or don't have one, you'll want to add up your take-home pay, then subtract all your living expenses, including the amount you need to pay the minimums on your credit cards. Look for ways to cut back on nonessentials. Consider paying the minimum amounts on all your debts and increase your payment for the card with the highest interest rate. Once that's paid off, direct a larger payment toward the next debt.

You might also consider a personal loan to consolidate debt. If your debt load is keeping you up at night, our partners at GreenPath Financial Wellness offer one-on-one financial coaching.

  1. Monitor Your Credit
  • Protect Yourself From Fraud and Keep Your Score in Shape

It's no secret that a good credit score gives you access to the best rates. Reviewing your credit history on a regular basis can also help you guard against fraud and identity theft.

If a thief gains access to your Social Security number or other personal information, they could use it to open new credit accounts in your name. Identity theft victims often learn about stolen data after receiving a loan denial or collection call from an unfamiliar company. Review your credit history reports at least annually. Request free copies from Report suspected identity theft to the Federal Trade Commission.