In 2021, many have recommitted to improving our personal finances. One of the best ways to make progress is to go back to the basics, revisiting three important components of personal financial planning — debt reduction, savings and retirement planning, and investing — and asking, “Am I doing enough?” Focusing on these three pillars of personal finance will move you closer to building wealth.
Many financial advisors recommend reducing personal debt first and foremost. While we at Agili certainly advocate reducing debt, we believe debt reduction can be accomplished concurrently with achieving other financial goals, such as saving for retirement and investing. With regard to the debt reduction piece of the wealth-building puzzle, we suggest developing a plan with a trusted financial advisor to make regular payments against principal.
Savings and Retirement Planning
Another important aspect of personal finance and wealth-building is savings and retirement planning. One of the most important tips for savings is creating an emergency fund to cover 6-8 months of expenses. But remember, building that emergency fund and saving for retirement do not need to be mutually exclusive!
Below are tips and information regarding retirement savings vehicles, 401(k)s and IRAs:
Employer Retirement Plans
- At a minimum, we suggest contributing to your 401(k) up to your employer’s maximum match amount. Ideally, we recommend saving more.
- In 2021, employees can contribute up to $19,500 to their 401(k), 403(b), or 457 plan (and this doesn’t include the employer match). The catch-up contribution for those over 50 is $6,500, for a total of $26,000 in possible savings. More information about 2021 retirement plan contribution limits can be found on the IRS website.
- Financial Strategist, Dan Honsberger, CFP®, writes about maximizing a 401(k) plan in his blog post, Habits of a 401(k) Millionaire.
Traditional and Roth IRAs
- The 2021 contribution limits for both Traditional and Roth IRAs is $6,000 ($7,000 if age 50 or older).
- Financial Strategist, Sarah Caine, CFP®, shares the differences between the traditional and Roth IRAs and their best uses in her blog post, When Should I Choose a Roth IRA over a Traditional IRA?
Seeking input from a knowledgeable advisor about choosing investments and investment vehicles is another way to grow wealth. At Agili, we believe in developing a holistic investment plan based on each client’s unique circumstances, risk tolerances and time horizons. Additionally, we know that one of the best ways to mitigate the effects of volatility is to have a diverse portfolio and we always keep in mind the maximum downside a client can tolerate. For an additional resource, please review an informative blog post written by Manager of Investment Operations and Chief Compliance Officer, Amber Ott, How Does Agili Choose Investments?
Attending to these important components of personal finance — debt reduction, savings and retirement planning, and investing – makes it likely that financial goals can be achieved. We’d love to help you fulfill your dreams. Please email us any time!