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Start Saving Now!

Planning for a future 40 years from today may seem impossible, crazy, and downright unnecessary… especially when it’s hard enough to see past that dreadful exam you haven’t started studying for. While retirement is in the far off future, saving for retirement early will help you maintain your standard of living as you enter your 70s and help you avoid turning back to your college ramen noodle diet.

Why Save Now?

Ideally, you should start saving in your 20s, once you graduate and begin earning paychecks. By starting a retirement fund today, your investment will have more time to grow and compound, meaning that each year’s gains will generate their own gains next year. The following graph shows the impact of investing early.

This chart assumes a 7% annual return. Investing $5,000 annually between the ages of 25 and 65 will result in a total of $1,142,811 for retirement. Your retirement fund will have $602,070 more than if you would have waited to make the exact same investment…10 years later. For further comparison, if you only invested between the ages of 25-35 (10 years), you would have earned $61,329 more than investing between the ages of 35-65 (30 years), all else equal.

Image result for growth of savings assets jp morgan

 

 

 

 

That sounds great! So how do I get started?

How you plan for retirement when you’re younger will differ from when you’re older. When you’re younger, you should save at least 7% of your salary for retirement. With the average salary of those between the ages of 20-30, $32,000, your average annual retirement savings will be approximately $2,240. This equates to putting away $43 per week, or giving up a few Starbucks coffees or Uber rides.

Many employers will offer a 401(k) retirement savings plan. If your employer offers to match your 401(k) contribution, take advantage of this benefit by contributing at least the amount that they’ll match. By doing so, you will double your retirement contributions at no additional cost to you.

If your employer does not offer a 401(k) plan, you might consider an IRA (Individual Retirement Account) as a means of investing for retirement due to their tax savings. You can open an IRA through your bank, or other entities such as Wells Fargo or Edward Jones. When choosing what to invest in, you will want to invest more aggressively when you are younger. This means you will want to invest in high-risk/high-yield options, such as stocks. Even if your investments perform poorly in the short run, you will have time to recover financially prior to retirement. Investing is no easy task and many choose to hire a financial planner. To ensure your planner is top-notch, you can utilize http://www.plannersearch.org/ to search for planners who are certified.

I Can Rely on Social Security, Can’t I?

In order to be well prepared for retirement, it is a good rule of thumb to save the equivalent of 85% of your end-of-career salary for each year of retirement. For example, let’s say you make $80,000 per year at the end of your career. You will therefore need approximately $68,000 per year in retirement, or a total of $1,360,000 for all 20 years. The average Social Security monthly retirement payment is only $1,334.21. This comes out to just $16,010.52 per year, leaving you $51,989.48 short each year.

Budgeting Your Life with Your Finances

Saving for retirement shouldn’t mean compromising your dreams and goals in your 20s. By creating and utilizing a budget, you can balance your financial responsibilities (saving for retirement, student loan payments, rent, etc.) with the things that matter to you (buying that engagement ring, backpacking across Europe, finally buying food other than ramen, etc.). To kick start your budget, you can utilize the Spending Plan Worksheet that can be found at www.k-state.edu/pfc/budgeting. For more hands on help with saving for retirement or budgeting, feel free to set up an appointment with a peer financial counselor by going to www.k-state.edu/pfc/services.  By making the choice to start saving for retirement today, you will greatly increase your wealth, opportunities, and lifestyle in the future.

Sources:

www.saltmoney.org

http://www.cheatsheet.com/money-career/3-big-benefits-of-saving-early-for-retirement.html/?a=viewall

www.jpmorgan.com

Jillian Taylor
Peer Counselor III
Powercat Financial Counseling

Your New Year’s Money Resolution

The New Year will be here in a few short weeks. With finals and the busy holiday season approaching, the New Year will be here before we know it. Around the end of the year we start to reflect, wondering if it went as planned. Maybe 2015 brought some unexpected financial hardships, maybe you ended up spending more than you earned, and maybe your student loan debt grew and grew this year. All of these situations can seem overwhelming. That is why PFC is here to help. Remember, you can always request an appointment at www.ksu.edu/pfc for personalized help. But below are a couple generalized tips to keeping your financial goals, or New Year’s Money Resolution for 2016 in line.

What if I am happy with my finances?

You may be thinking you don’t really need to change any part of your finances. But it is important to remember that the unexpected could always happen or things may not go exactly according to plan. So if you are one of the lucky students who have little, or no student loans, maybe you could work on building your credit. Or if you have an excess amount of money each month, instead of splurging on a trip to the mall, put it into an emergency savings account fund. The point is that even if your financial situation seems great, there is always something to work on to make it that much better.

What do I do if I need to start up a new and improved budget for the year?

Although it is difficult to change the things of the past, you can always plan for the future. 2016 may bring many obstacles and your financial stress could be at an all time high. If this is the case and you need to vamp up your budget, you can visit our website at www.ksu.edu/pfc/budgeting for some information on budgets. Don’t get discouraged if 2015 didn’t go as planned. Sometimes it can be hard to stick to a budget. Try to get a fresh start for 2016 and push yourself to stick to a realistic budget that allows you to spend money where you want. Remember, sometimes it doesn’t always seem this way, but budgets are your friend. They help you stick to a plan, which can be essential for you to reach your long-term financial goals.

How can I build my credit throughout the year?

Credit can be a scary thing. Just remember, that like a budget, credit is your friend. A good credit history can help you get a lower mortgage rate or a higher credit limit, as well as benefit you in other ways. If your goal for the New Year is to gain some good credit history but you don’t want to change much about your spending habits a credit card might be for you. There are other ways to establish credit like: auto loans, secured credit cards, and student loans. Visit our website, www.ksu.edu/pfc/credit to learn more about the various types of credit and find out which one may work for you. If you are making payments currently on your student loans this is helping to build your credit history. If you want to build existing credit make sure you are always paying your bills on time, and using your credit wisely- we recommend about 30% of your credit limit. Another important tip to remember is to check your credit report for discrepancies, if there is incorrect information on your credit report, clearing this up can dramatically increase your credit score immediately. You can check your credit report at www.annualcreditreport.com 3 times a year, one per credit bureau, for free.

Finally, no matter your financial situation, do not get discouraged. A year is a long time and a resolution is in fact that, a resolution, a goal, something you are aspiring towards. So if it doesn’t go as planned immediately, or if you have a couple hiccups throughout the year don’t give up! Just check in on yourself periodically, or have a friend or family member hold you accountable if need be. Good luck! And happy (almost) 2016!

Hillary Williams
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

New Year, New Financial Attitude

Believe it or not, 2015 will be coming to an end before we know.  With that for many people comes a “New Years Resolution” and financial stress. As December approaches, it is important to spend some time reviewing the past year and making goals for the upcoming year.  Some tips to consider when preparing for the new year are: budgeting, goals, financial literacy, and savings.

If you haven’t made a budget, it is a great first step towards achieving financial success.  Budgeting can be overwhelming for some people, but just keep in mind that it is a process and requires both time and work.  Use December expenses and income as a rough draft for your budget so when the beginning of the year rolls around you are ready to really focus in on your financial situation. Using December as a practice run allows students to have some experience at the beginning of the year, instead of being new to the budgeting process.  This experience gives students a chance to start planning ahead for the upcoming semester, school expenses, or the opportunity to begin saving for spring break.

Speaking of spring break or education expenses, goals are a vital piece of creating a budget.  The end of one year and beginning of the next is a great time to set some new financial goals.  There are short-term and long-term goals.  A short-term goal is something that you want to achieve within the next year and a long-term goal is something you want to achieve in longer than a year.  If you had goals from the previous year, be sure to address the process of them.  It is especially vital to review any previous long-term goals you had set.  It is really important to make sure that any goal you want to achieve is a SMART goal.  SMART goals stand for specific, measurable, attainable, realistic, and timely.  For example, if you were saving for a new car a smart goal to achieve that could be: “I would like to purchase a new car by December 2018 for $10,000 by saving $188 a month.”

Making financial decisions can be difficult for many college students who are managing their money for the first time in their life.  If you are feeling financially stressed, feel free to reach out and get help. A great resource for students at Kansas State University is a free individual counseling session with our peer counselors and Salt.  Salt is the free online financial tool Powercat Financial Counseling bought for students and alumni that offers numerous financial articles, tools, and many other resources.  A recommendation that is helpful when making good financial decisions is to find out what motivates you to make those decisions.  Do you have a goal in mind when you make positive financial decisions or is it the feeling of achievement you feel?  Either way, use that motivation to continue to find success in your financial situation.  If you are unsure of what motivates you, try to really think about the reason behind the financial decisions you want to make.

Lastly, as the new year begins make saving a priority.  A beneficial habit for students to establish is to pay themselves first.  If you try to make it a priority to save a little bit of money each and every month before spending more the financial goals you set will start to become a reality.  If you aren’t sure where or how to start savings, start small. Instead of spending $2 a week at the vending machine, try saving that and at the end of the year if you saved that $2 every week you would have a total of $104 of just vending machine money each year!

Although this can be a stressful time of the year with a lot of extra expenses, just remember to take a deep breath and plan ahead.  The new year is always a great time to regroup and form positive financial habits.  If you make a financial resolution, try to stick with it and the hard work will pay off.  Powercat Financial Counseling is here to assist you in making these steps as well.

Kristen Payne
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

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