Financial Planning / Money Saving Tips / Wealth & Prosperity

Three Ways to Build Financial Security

"Three Ways to Build Financial Security"By Liane Rosenberg and Cindy Starke, Portfolio Managers, Value Line Funds

The process of saving is a slow and steady race. In the stock market, women have been “winning” the investment race recently, as a study found that portfolios of female investors outperformed those managed by male investors by 1.4% over a seven-year period.* Regardless of where you are along your savings route, your level of success in this long journey depends on having the right financial mindset and taking action.

Consider these three easy steps to begin taking control of your finances and setting yourself on a savings and investing path.

  1. Save at Work

If your employer offers a 401(k) retirement account make sure to participate. In a 401(k) account, you are typically offered a variety of stock or bond mutual funds in which you can choose to invest.

There are several benefits to saving at work:

  • Convenience. You can contribute a certain percentage of your income each pay period to a 401(k) retirement account. It’s easy and funded with pre-tax dollars that lowers the amount of income on which you pay taxes today.
  • Extra Money for You. Many employers offer to match your contributions up to a certain dollar or percentage amount. Don’t leave money on the table—try to contribute at least up to the matching amount.
  • The Money is Always Yours. The contributions you make in your 401(k) account are yours to keep—even if you move to a new company. And, depending on your employer’s vesting schedule, you may be able to keep your company’s matching contributions as well.

If you are already making regular contributions to your 401(k), consider increasing your contribution by 1% or more each year or when you get a raise. Even a 1% increase will boost your retirement savings over the long term, but may it not make a noticeable difference in your current take-home pay.

  1. Save Now for Your Children’s Education

If you have children, start funding an educational savings plan, such as a 529 Educational Savings Plan, as early as possible. There are no income or age restrictions to setting up an account. Earnings grow generally tax-free and can be used for educational expenses, including tuition, fees, and room and board.

A 529 Plan provides both federal and state tax benefits. While the contributions to your 529 Plan are not tax deductible at the federal level, earnings may be subject to state tax.

  1. Start an Automatic Investing Plan

Investing requires discipline. An automatic investing plan can be a great way to get into a habit of investing in stocks or bonds. With an automatic investing plan, emotion is taken away as a pre-determined amount of money is taken out of your checking account either monthly or quarterly and invested in shares of mutual funds.

An automatic investing plan takes advantage of dollar cost averaging, which allows you to purchase shares at various intervals and at various prices depending upon market conditions. This strategy provides an investor with an easy way to participate in the stock and bond markets and build account balances over time.

Take Control of Your Finances

Take control of your finances today and the future will seem far less formidable. Whatever route you choose to get closer to the ultimate finish line—financial security—the journey will require patience and discipline. Any of these paths, whether you decide to go with a 401(k), a 529 Plan, or an Automatic Investing Plan, or any combination of the three, will create a culture of saving and investing.

* According to October 11, 2013 article in The Washington Post written by Robert Carden, women have been winning because they tend to trade stocks less often than men. Article was titled, “Behavioral economics show that women tend to make better investments than men.”

About Liane Rosenberg Liane Rosenberg has been a fixed income portfolio manager at Value Line Funds since 2009 and has more than 20 years of experience in fixed income portfolio management. Ms. Rosenberg received her Master of Business at the Fordham University School of Business, and her Bachelor of Arts, with a degree in English and Journalism, from the State University of New York at Albany.

About Cindy Starke Cindy Starke has been a portfolio manager at Value Line Funds since 2014 and has nearly 20 years of mid and large cap growth investment experience. Ms. Starke received a B.S. in Business Administration from Fordham University and a M.B.A., with a concentration in Finance, from Fordham University. Visit: www.vlfunds.com for more information.

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