The Money Tasks You’re Avoiding And How To Make Progress (Part 2)


In our last post, we kicked off our two part series of addressing the money tasks you’re avoiding and the steps you can take to make progress. Today, we’re covering four additional areas that you can make headway in your financial life. 

4. Open an IRA

How many times have you sat down at the dinner table and said to your spouse, “After we eat, let’s open an IRA.” Yeah, probably never. When you actively contribute to your workplace retirement account, invest in a separate portfolio, and funnel money into your savings account, it can be difficult to open – let alone manage – another account. 

IRAs are a great addition to your retirement savings journey. They afford more flexibility and control over your investment options, fees, and providers making it an excellent complement to an existing 401(k). 

Traditional IRAs operate similarly to your workplace plan. Contributions are pre-tax, investments grow tax-free, and distributions are taxed as ordinary income. To add more tax-efficiency into your retirement planning, it’s also good to consider investing in a Roth IRA. 

You fund a Roth IRA with after-tax dollars, the money grows tax-free, and qualified distributions remain tax-free in retirement. This tax-advantage is hugely beneficial for retirees to keep their tax bill at bay. While that might not be your top priority right now, it will pay off later on. You will probably make more money as you advance in your career, which increases your tax liability. By paying taxes in a lower tax bracket now, you end up saving money in the long run by not paying them later. 

Roth IRAs do carry income thresholds. In 2020, those making over $139,000 (if filing single) or $206,000 (if married filing jointly) aren’t eligible to make direct contributions. If you want to fund a Roth, it must be done with a conversion from your traditional 401(k) account. Conversions have important tax responsibilities, so consult your tax advisor before initiating. 

5. Establish a 529 Plan

When it comes to saving for your child’s education, the earlier the better. A 529 plan can be the impetus of your savings journey. 529 plans are tax-advantaged savings plans for education costs. While contributions are after-tax, gains grow tax-free and remain tax-free for qualified educational expenses like tuition, fees, books, and supplies. 

529 plans differ from state to state, and many allow non-residents to establish an account. Be sure to shop around for plans with reasonable fees, investment options, and contribution limits.

Many families use this vehicle to plan for college costs, but 529 plans can also be used for K-12 expenses. The SECURE Act also instituted a provision letting account holders withdraw up to $10,000 tax-free dollars for student loan repayment. 

Adding another investment account to your arsenal requires careful planning and attention. Think about the following:

  • How much can you reasonably expect to save now?
  • Do you plan on using the funds for K-12, college, or both?
  • Are you sacrificing your retirement savings to fund the 529?

Knowing how much you can save and how you intend to spend the money can help you make a reasonable plan. Remember, there is no loan for retirement. Saving for education is a wonderful gift, but it should only be done after your retirement accounts are funded. 

6. Ask for the Raise You Deserve

There are few conversations more uncomfortable than asking your boss for a raise. It may be especially difficult during COVID-19 where many businesses have made budget, staff, and other office cuts. But the work you do is incredibly valuable, and if you’re overdue for a raise, now is the time to ask for it.

A raise can help you accelerate your financial plan, giving you additional resources to pay down debt, save for retirement, and fund long-term (or short-term) savings goals. Before knocking on your boss’s door (or sending a Zoom invite), be sure you have prepared the following: 

  • Comparable salary for your position and experience at your company and its competitors. 
  • Concrete accomplishments you’ve made while in your role.
  • Positive feedback from team members, stakeholders, or supporting business units.
  • Your desired salary increase. Our tip is to start a little higher to give room for negotiation. 

It’s also wise to alert your boss to the nature of your conversation before the meeting, that way you’ll both be ready to discuss your request. Send an email saying you’d like to set up a meeting to discuss your compensation, for example.

7. Revisit Your Goals

Financial planning is too often seen as a one and done task. But financial wellness takes time, engagement, and sometimes even revisions to get right and progress forward. We encourage you to look at your financial goals today. Notice how they may have changed, especially this year, and also how they haven’t. Ask yourself:

  • What progress has been made on each of your goals? Celebrate your accomplishments – even small milestones – to help boost motivation and inspire progress. 
  • Are there any intentional changes you need to make? Perhaps extending the timeline on short-term goals to accommodate any losses and fluctuations this year?

Let your goals inspire the progress you wish to see in your financial life. Returning to your goals can be enlightening and provide the motivation you need to stay the course. 

We discussed many financial housekeeping items today. If you have any questions or need help moving forward on any of these, please reach out to our team. We love helping people prioritize and take control of their financial life.

Mary Beth Storjohann, CFP® is an author, speaker, and financial coach who takes a fun, no-nonsense approach in working with individuals and couples across the country, helping them make smart choices with their money.

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