Making Sense of My Financial Mess: Planning for My Future

Every two weeks, when my husband gets paid, his retirement savings isn't really a thought. When he first starting working with this employer, he filled out a form, sent it to human resources, and that was the end of his financial planning for retirement. I can't help but think he's lucky, not only is his retirement savings automatic, his employer throws in something extra each pay period.

I, on the other hand, am self-employed and I haven't started saving for my future.

To be perfectly honest, everything else seems more pressing. I have to remember to save for taxes each time I get paid. I have three kids, so my checks quickly get funneled to groceries or new clothes or a visit to the doctor.

I'm not alone, either. Scott Hanson, senior partner and founding principle of Hanson McClain, admitted that this is a common temptation being faced by self-employed professionals. No matter the age of a business, there are always competing issues. It is easy to neglect to save for retirement, especially when you are young, but putting off year after year quickly adds up.

The key to tackling my procrastination and to avoid finding myself near retirement with little saved is committing to a periodic savings plan, according to Hanson.

"If you work for an employer, money is being taken out before you see your paycheck, if you're self-employed that doesn't happen," he said. "Paying yourself first is by far the most important thing you can do"

Hanson suggested setting up a monthly transfer into an account, making saving for my retirement automatic and eliminating the opportunity to put it off each month. Commitment to saving each month is the meat and potatoes of retirement planning, so selecting the type of account is really just a detail to iron out with the help a financial advisor.

An IRA allows for saving up to $5,500 each year towards retirement. Deciding between a traditional and Roth IRA should be made on a case by case basis. The big difference between the two is found in how the money is taxed. A traditional IRA allows for you contributions to be used as deductions the year the money is deposited in the account, but that money will be taxed upon withdrawal. In comparison, a Roth IRA is taxed the year it is deposited and typically the money is tax -free upon withdrawal.

Another option Hanson shared with me is a SEP IRA, or a Simplified Employee Pension. He suggested this option if I planned to save more than $5,500 a year. Since this option specifically for self-employed individuals, it allows for yearly contributions of up to 25% of my income or $53,000, whichever is less.

I honestly don't believe I'm on track to start saving any more than $5,500 a year for my retirement, but I am feeling ready to open an IRA and set up an automatic withdrawal from my bank account each month.

I know that what has been standing between me and a plan for my future isn't really a lack of information, it's a habit of putting everything else first, from new shoes for my toddlers to home improvements. The truth is, what is needed is for me to re-frame how I think about the future. It may feel like it is far off, that my family has more pressing needs here and now, but in reality the little I designate for my retirement account now is one of the best ways to care for the long term needs of my family.

Mary Sauer is chronicling her progress in repairing her finances through the series 'Making Sence of My Financial Mess' for Sapling. Follow along as she comes to terms with her current state of affairs -- real, honest, and all too familiar, Mary is putting in the work to make positive changes with her money.

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