Best practices for a healthy financial life, part 2

This is the second of a two-part series, Best practices for a health life.

Barry Glassman
WTOP Financial Contributor

WASHINGTON — Your training to live a healthy financial life began last week with the “Best practices for a healthy financial life, part 1.” The article encouraged readers to learn more about their current financial situations and to track their spending.

It may be painful, at first, to track your spending — after all, ignorance is bliss — but resist the urge to ignore past habits. Tracking your spending is the first, and most important, step to achieving your goals.

Digging deeper into your finances most likely uncovered several issues that you now know you should address. Whether you realized that saving for retirement or for your children’s college education is a higher priority, or that you should set up basic estate planning documents, you are ready to begin the next step: setting your goals.

Whatever your goals may be, start by making a list. This list is your map. It shows where you are now and where you want to go. With a bit of guidance, you’ll know what to do to accomplish your financial goals.

Consider this your financial GPS (Goals and Priorities Steering).

GOAL: Saving for Retirement

At Glassman Wealth, we have a $2 million minimum of investable assets to work with us. Here’s the reason I’m pointing this out: Most of our clients did not inherit their wealth. They’re smart; they worked hard and saved over many years to accumulate their wealth. They made saving, particularly for retirement, a priority, and the results are clear. Not everyone will save millions for retirement, but most people can save more for a retirement that may last 30 years or more.

The simplest way to save for retirement is through an employee-sponsored retirement plan such as a 401k or 403b plan. Many employers offer a match of up to a certain percent (often 5 percent) of an employee’s contribution. That free money can really add up.

Setting aside even a small amount each month can make a big difference years from now when you’ll need it in retirement. Let’s say that you’re 30 years old and you save $2,000 a year for 10 years. If we assume an 8 percent average rate of return, you’ll have $198,422 at age 65.

This helpful tool from will show you what compounding over time can do for your savings.

By starting early, you accomplish two very important things: a habit of saving, and the benefit of growing your money over time as dividends and interest earned are reinvested.

Even in your 40s and 50s, it’s never too late to save. There are some really great calculators to help you figure out how much you should be saving for retirement. Two of my favorites are Kiplinger’s Retirement Savings Calculator and the T. Rowe Price Income Calculator.

GOAL: Saving for College

Most states, and some private institutions, sponsor college savings plans, known as 529 plans. They are the preferred vehicle for saving for a few reasons:

  1. Contributions grow tax-free if used for qualified education expenses;
  2. You may be able to write off contributions on your state tax return;
  3. Dollars in a 529 plan are outside of the grantor’s estate, and you may continue to have control over whom the beneficiary is and how the dollars are invested.

The Best Way to Calculate College Costs and The Best 529 College Savings Plans: Reviews and Ratings are great resources for learning more about saving for college.

GOAL: Create Basic Estate Planning Documents

In a previous article on, “Estate planning: three things you need besides a will — and why you need a will too,” I explained the five basic estate planning documents that everyone should have, regardless of their wealth.

These include a will, beneficiary designations, financial power and attorney, medical power of attorney and an advanced medical directive. YOu can download these forms at

GOAL: Buying a House

The biggest hurdle first-time homebuyers face is the down payment. Coming up with a large lump sum of cash may seem daunting, but for many people, it’s attainable.

To start, you need to know how much of a mortgage you can afford. has an Affordability Calculator to help calculate how much of a house you can afford based on your income, monthly debts and how much you plan to put toward a down payment.

To save for a down payment, you may need to seriously cut your spending. If you want to save $20,000 in two years, you’ll need to put aside $833 a month. Now that you are tracking your spending, you’ll know what you can do without in order to redirect that money to your new home. You may have to consider extending your savings timeframe based on what you can realistically save.

You may also qualify for down payment and closing costs assistance. To learn more about programs offered in your area and whether you qualify, go to the Down Payment Resource Center.

GOAL: Hiring a Financial Advisor

For some, hiring a financial advisor makes sense. Knowing what to do and when can be challenging, especially if your financial situation is complicated or you want someone with the financial expertise to lead the way.

To find a financial advisor, consider an organization such as Garrett Financial Planning Network. I’ve also compiled a list of financial advisors in the D.C. metro area that I have known and for whom I have great respect.

The final goal that I believe everyone should consider is learning more about what insurance coverage is necessary. I focus on that topic in the “Best practices for a healthy financial life, part 3: Sharing the risk — What insurance do I need?”

You’ve accomplished a lot so far on your way to leading a healthy financial life. Now, you’re armed with many of the resources you need to help you establish and accomplish your financial goals.

Editor’s Note: Barry Glassman, CFP

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