4 Savings Habits Financial Advisers Do With Their Own Money

As fiduciary advisers, our job is to act in the best interest of our clients first and foremost. The actions we take for our clients are based on what’s in their best interest and alignment with their individual goals.

But have you ever wondered how financial advisers approach their own financial planning? Are there ‘hidden secrets’ that advisers do to save for retirement? We sat down with Lara Mazek, CFP, to discuss four habits she makes with her own money, and how you can apply them to your own life.

Key takeaways:

• Establishing a reverse savings approach helps to prioritize saving and investing goals first.
• Creating specific goals for short term savings helps boost motivation and keep you on track.
• Increasing your contributions to retirement accounts yearly little by little helps build wealth overtime without it feeling like a daunting change.
• Even many financial advisers seek guidance from an objective third-party adviser for their own financial planning needs.

#1: Pay yourself first with a reverse savings approach

One common question I get asked by my clients is, “how do I know how much I should be contributing monthly to my 401(k) or other retirement accounts?” The simple answer is, max out whatever employer match you have, and then add as much as you can without lowering your short-term financial security. You want to build a strong foundation for your retirement, but you also want to enjoy life in the present.

Many people calculate this by subtracting their fixed expenses, then variable or discretionary expenses, and then save whatever amount remains. While there is nothing inherently wrong with that approach, it’s likely not the best approach to build long-term wealth.

This is why I take a reverse savings approach, which prioritizes my savings and investment goals first. Instead of saving what is left over, my partner and I immediately route a set amount to savings, and base everything off what is remaining. Because this transfer is automatic, I don’t even notice the difference. With this method, we are prioritizing our long-term goals in a way that it becomes non-negotiable.

#2: Establish specific goals for short-term savings

Having a reverse savings approach provides a strong foundation, but what good is it if you don’t know what you are saving for? When it comes to your more liquid savings accounts, creating specific goals and use cases helps boost motivation.

For example, I could create specific goals for my travel savings fund, such as reaching $10,000 to take my family of 4 to Disney World. Or, instead of having an umbrella emergency fund budget, I like to get specific and break it down into a home repair fund or medical expenses to cover any potential gaps in insurance.

By creating these specific goals, I’m less likely to waver from my established plan.

#3: Increase contributions gradually over time

When you’re early in your career, there can be a lot of demands on your paycheck and it may be difficult to reach your retirement savings goals right away. I recommend trying to increase your savings as you get pay raises or pay off debt, rather than using it as an opportunity to increase your lifestyle.

To keep my savings momentum going, I challenge myself to find ways to increase my contributions every year – even if it’s by a small percentage. Making those small incremental increases can be almost unnoticeable in day-to-day life, but over time, even small increases can significantly boost your retirement savings and take advantage of the power of compounding.

#4: Outsource my own investment management

That’s right – even financial advisers recognize the value of having an objective third party manage their investments. Managing your own money can increase your likelihood of basing decisions off emotions, risk, or fear, rather than logic and reason.

Working with a trusted fiduciary adviser can provide accountability, perspective, and confidence that my investment strategy remains aligned with my goals.

The Bottom Line

While these are habits Lara personally follows, there is no one-size-fits-all approach to financial planning. These savings habits should serve as inspiration, but not an exact roadmap.

The most effective financial plan is one that's built around your unique situation and regularly adjusted as your life evolves.

If you’d like help in building a personalized financial plan that will help you reach your goals, click here to get connected with an adviser.