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- There's some money advice no one wants to hear, but financial planners still have to share it.
- Experts say their clients never want to be told they need a budget, or to save more for retirement.
- They also hate to be told to prioritize their own retirement over their kids' college education.
Vanguard Personal Advisor Services
There are certain tidbits of money advice that make people shudder, but that are critical to long-term financial well-being. Advice like "you need a budget," and "save early for retirement."
Financial planners and other experts know better than anyone what money advice typically gets ignored but needs to be heard. So we asked a few pros about the money wisdom people hate to hear, and why this advice is worth paying attention to.
1. Building wealth is pretty boring
It's not about a million-dollar idea or landing on a fat inheritance to grow your money. The road to wealth is pretty boring, and is actually no different than working toward any other life goal.
"It takes time, energy, and discipline that not everyone wants to commit to," says Brett Koppel, a financial planner and founder of Eudaimonia Wealth. "Just like achieving a healthy lifestyle, the results of our efforts don't appear nearly as soon as we expect them to."
"It's a lot more challenging to consistently make a point to contribute to an investment account once the money hits our checking account," says Koppel. "It's really no different than hoping we're motivated enough to buy a salad and not a slice of pizza when we're hungry. If we haven't taken the time to meal prep for the week, the battle for most of us is already lost."
2. You don't have enough money saved for retirement
Unfortunately, this is pretty common. According to the National Institute for Retirement Security, 68% of Americans say they won't be able to save enough to reach financial security in retirement.
"The earlier clients start saving for retirement, the better," says financial planner Jovan Johnson of Piece of Wealth Planning. "It's much harder to catch up retirement savings, as there is less time for compound interest to work in their favor."
If you're getting a late start, there are some ways you can play catch-up with your retirement savings. Johnson recommends considering a handful of options: retiring later, working part-time in retirement, and sacrificing some aspects of your current lifestyle to save more toward retirement.
3. Yes, you need a budget
It's not about how much money you make, it's about how you manage your money. And that starts with creating a budget, having a savings plan, and being realistic with your finances now.
People hate hearing that they need a budget, says Michael Kelly, a financial planner and president of Switchback Financial in Madison, Connecticut. "The word 'budget' is like nails on a chalkboard," says Kelly. "Their minds immediately jump to restrictions, and having to live a 'boring' life."
The reality? Budgeting is a foundational pillar of financial wellness. "No matter what we do with tax mitigation or investment optimization, it won't matter if there is no progress toward more money coming in than less going out," says Kelly.
Budgeting doesn't have to feel restrictive, or be time-consuming or difficult. To make it easy, automate what you can with bills, and try no-hassle budgeting methods, such as the guilt-free budget.
Says Kelly, "It's about rebranding budgeting as a method for intentional spending to balance living an exciting life today and saving for the future."
4. Prioritize saving for your retirement over your children's education
Parents are taught to put their kids' well-being first and their own needs second. In turn, the idea that you should put saving for retirement above your children's college education can be a prickly topic, and quite difficult for some folks to get their heads around.
But as they say when you get on an airplane, put your own oxygen mask on first before helping others, says Johnson.
"You must first take care of your current and retirement needs before considering funding your child's education costs," says Johnson. "Your children will have options when it comes to funding their education - scholarships, grants, loans. However, when it comes to your retirement, there are very few options if you have not saved an adequate amount of money."
In other words, while you can take a loan out and look for financial aid for your child's education, you can't take a loan out for your retirement. To get started saving for retirement, look at employer-sponsored plans such as a 401(k) or 403(b) that you might have access to through your workplace. Or you can look for retirement plans you can open on your own, such as an IRA.