3 game-changing pieces of professional advice that transformed the way I manage my money

PFI Disclosure 1

  • By the time I looked closely at my money, I’d already made some major mistakes.
  • I met with a professional to put together a plan of action, and she had a handful of game-changing recommendations that have changed how I manage my money.
  • For one thing, she had me move my cash into a high-yield savings account to earn about 20 times more interest while keeping it liquid. She also had me open a separate account as an emergency fund, and get started saving for retirement right away.
  • Now is the time to make a change. SmartAsset’s free tool can help you find a financial professional near you » 

In 2019, I stopped being so hush-hush about my finances and started getting help. First, from my partner, who after three years of dating, took a deep dive into my money and said, “You really need to speak to a professional.” The money mistakes he instantly saw were mistakes I didn’t believe I was making. He told me that I was losing money by keeping my cash in a savings account with rock-bottom interest. He asked me why my 401(k) was hardly more than triple digits, and I shrugged my shoulders.

That conversation, juxtaposed with blowing out another set of birthday candles in April, reminding me I’m not getting any younger and therefore my money mistakes are probably getting harder to fix, prompted me to reach out and seek help.

A friend at a party told me that a “trainer” at The Financial Gym in New York City whipped her finances into shape and within just a few months, she had paid off a big chunk of debt, stuck to a budget for the first time in her life, and was on track to save more money that year than ever. It sounded too good to be true, but I didn’t have a choice but to walk in the door and expose my finances to a stranger in hopes of getting on a better path.

In my second session with my trainer, she revealed my 18-page personal plan of action, which gave me a better understanding not only of what I’ve been doing wrong but what I need to start doing right. Here are the three biggest, game-changing takeaways that changed the way I manage my money.

1. You can’t just let your cash sit in a savings account 

Perhaps my only consistent financial strategy was hoarding as much cash as I could in a savings account. I thought I was doing the right thing, and I enjoyed logging into my bank account and seeing cash I knew was safe and accessible (rather than in a retirement account I couldn’t touch or in the risky stock market), especially since for most of my early 20s there wasn’t much there.

But one of the first things my trainer showed me was that ultimately, I’m losing money by letting cash sit idly in a savings account, especially the one I had it in. All of my money was in an account receiving less than .03% interest a year. Her first recommendation was to move the money into a high-yield savings account at another bank where you can get close to 2% savings a year. That move would earn me about 20 times more on my money every year.

Next, my trainer advised me to take a portion of the money in savings and consider investing it, explaining to me asset allocation and options that could work well for me right now (for example, the best plan was short-term allocation of 60% stocks and 40% bonds, since I don’t need the money immediately). 

Since the idea of investing my money was new to me and something I was never educated in before, my trainer recommended a handful of books and podcasts to listen to, which is something I made sure to do before I took a penny out of my savings account and invested it.

2. You need to get prepared for the unexpected 

After telling my trainer all of my money details and practically my life story, one of the biggest takeaways is that I need to plan now for the unexpected. I’m a freelancer who owns my own business and because of that, it was important to take some major steps ASAP.

The first step was building an emergency fund. Creating a separate savings account that could act as a game plan in case something big and bad happened (like a health scare or clients letting me go) is something that can future-proof my finances now. My trainer mentioned that usually she instructs clients to save between three and six months but since I’m self-employed, I should work on saving two additional months, just to be extra secure.

Without this fund, I could face a major life change that could shift the course of my finances.

3. It’s not too early to start planning for retirement

One of the things I’m infamous for rolling my eyes out is the idea of planning for retirement. Why set aside money now when I have bills to pay and a life to live in the present? Talking this out loud with my trainer made me realize just how wrong that mindset was.

I didn’t have much in my 401(k) because I’ve been self-employed for quite some time — and because of that, I have less in my retirement accounts than I should. My trainer recommended contributing to a portion of my monthly paycheck to my SEP IRA (the retirement fund for those who are self-employed). When I pushed back, she showed me on a retirement calculator how if I put money in now, compound interest means it will grow much faster over 30 years invested in a retirement account than it would sitting in my savings account. Plus, I have a plan for retirement, which is something I’m realizing more and more that I need.

I’ve started sectioning out a portion of my income every month for this fund, and while it puts me on a tighter budget every month spending-wise, I know it’s a decision that’s positively influencing my personal finances in a necessary way.

SmartAsset’s free tool can help you find a licensed professional to create your own financial plan »

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