Finance 101: Making your money work for you

Posted at 3:29 PM, Jan 09, 2017
and last updated 2017-01-09 17:16:33-05

1. According to a recent LearnVest survey, "Money Habits and Confessions," only 22% of people plan to contribute more to their retirement this year, but everyone should be thinking about their retirement. It’s never too early to start saving for your future: “It’s not magic, it’s math.”

2. The LearnVest survey, "Money Habits and Confessions," also found that 68% of Americans would rather share their weight than their credit score! More people need to #HavetheTalk about their finances and retirement plans with spouses, friends, or a certified financial planner.

3. There are a number of retirement savings accounts that will work best for your individual needs:

401(k): A 401(k) is a free retirement account you can only get through an employer, and it holds money taken directly from your paycheck. Sometimes, said employer also contributes money to your retirement fund—that’s called “matching.” Traditional 401(k) plans grow tax-deferred, meaning that you’ll pay taxes when you take the money out, not when you put the money in. A Roth 401(k) is also becoming more common.

Traditional IRA: A traditional IRA is set up so that your contribution each year is tax deductible (if you’re under a certain income limit), and you aren’t taxed on the income you make as it grows. You pay those taxes when you withdraw it for retirement, which you’re required to begin doing at age 70 ½. Anyone can open a traditional IRA.

Roth IRA: The Roth is different from the traditional IRA in that you pay taxes upfront at today’s tax rates. So, while you don't get any tax breaks today, you never have to pay taxes on your investment earnings.

4. If you want to put aside more money for retirement, these creative tips will help your savings grow:

Tip Yourself: Calculate the amount of money you would have tipped a barista, bartender, or waiter when you skip on that spend (by eating at home, for example), and then pay that tip fee directly into your retirement account.

Save What You Spend: If you can't live without your $4 latte every day, put $4 towards your retirement savings every time you buy one.

Just Put It Away: Saving for retirement becomes infinitely easier when it’s automated. Set up a recurring monthly transfer into your retirement account to save you the extra step and make sure you actually do it!

Run Your Finances Like You Run Your Social Life: Set a calendar reminder to check your retirement contributions and then another reminder to increase your contributions. Make sure that important financial to-dos don’t get lost in your inbox by setting up a separate email account just for your finances. Being extra organized from the start will lead to major rewards down the line.

5. The LearnVest survey, "Money Habits and Confessions," discovered that 64 percent of Americans want help managing their finances. A Certified Financial Planner will help you devise a plan that fits your needs so that you are securing your future.

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