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Simple Ways to Improve Your Financial Health

You’ve done the hard part and embodied the mindset that you need to save for retirement. Now you want to make sure you are doing your best to prepare for it. You’re already taking full advantage of the TSP match by contributing at least 5% of your salary every pay period, and you’ve made sure not to contribute more than $750 per pay period (under age 50) or $1,000 per pay period (over age 50) so you can capitalize on that match throughout the entire calendar year. But you want to do more. What should you, or any federal employees looking at preparing for retirement, do next?

For starters, many behavioral psychologists point out that the one of the hardest parts about saving is maintaining the habit. A straightforward way to tackle this is to automate the act of saving, essentially removing emotion and active willpower from the equation entirely! Looking first at your paycheck, add or increase your allotments to traditional IRAs, Roth IRAs, standard savings accounts, or a combination of the three. Now you don’t even have to think about the money coming out each pay period. You can further hack your psychology by committing a portion of each step increase, overtime pay, or raise towards your savings as well. Many of our clients swear by this trick as it tends to be extra money they weren’t accustomed to living off of anyway.

We also work with feds who take advantage of mobile apps that round up every purchase to the nearest dollar, using those extra pennies to gradually grow their savings. As a word of caution, this can become a Catch 22: loose change can really add up—which is great for your savings—but we also mean it can REALLY add up, so those engaging in more transactions than they anticipated will start to notice the additive effects on their monthly budgets. As you can see, different strategies are going to work best for different folks, but the underlying theme remains the same: engage in a practice that transforms your savings habit from a conscious action into an effortless automation.

Sometimes we encounter clients stuck in the headspace that they waited too long to put away money for retirement, so they shouldn’t even bother trying. While the long-term effects of compounded growth on your investments are, as Einstein puts it, the “8th Wonder of the World”, it is always better to get started! The best time to start may have been yesterday, but the second best time is now. As we like to say, your future self will thank you for every dollar you put away.

We want to leave you with one last tip: while saving for retirement should be one of your top priorities, you will also want to account for your current financial standing. Far too often we see folks with high-interest debt, such as credit cards with interest rates in the teens or even higher, who postpone payments month after month. Nothing will erode your financial foundation faster than high-interest debt left unpaid. So before you consider making an extra payment towards lower-interest debt like your mortgage or your car, do whatever you can to get rid of your credit card debt, even if you need to take out a TSP loan to do it! Keep those savings in your pocket and out of the hands of credit card companies and collection agencies.

We help federal employees and retirees optimize their financial plans every day by identifying holes in their strategies and finding solutions to get them back on track.

Request a free consultation with one of our retirement strategists to ensure you've got the right plan (and some peace of mind) in place today!

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