Recommended Next Steps For

The Producer

Create More Than a Safety Net

Establishing healthy savings habits is a key to having a solid financial plan, and producers usually have the whole savings concept down cold. However, compounding can quickly turn on Producers when they’re not careful. They’re the type of people who load up their checking and savings accounts — when at least some (and sometimes more) of that money should be put to work in the markets. Get a good idea of how much of a safety net you truly need, then put the rest of your savings to work for you by building an investment portfolio.

Walk through the past few months of your expenses to understand how much you need on a monthly basis to cover your bills and your basic wants. Then, depending on your job security and risk tolerance, you’ll want to set aside a safety net of at least three months of expenses, or closer to a year if you’re more comfortable with having a larger safety net. After that, invest!

Don’t Lose Money (Thanks to Inflation)

Some Producers can focus too much on preserving and too little on growing and enjoying. While inflation might seem like a joke in today’s economy, over time it’s a true force, and if your money isn’t working for you and growing at a pace at least equal to inflation, you can actually lose money by saving too much in cash.

After you’ve established an emergency fund and saved for your shorter-term goals , invest in a portfolio that reflects your longer-term time horizon, future goals, and risk tolerance. You don’t need to go from ultra-conservative to super aggressive — just risk appropriate. If you’re not sure, use a robo-advisor, a target-date fund or work with a professional to understand where your portfolio should be.

Go Ahead, Have Some Fun

Producers can take a cue from their connoisseur friends and think about experiences or purchases that might delight them … and then actually go for it! Again, this isn’t about fundamentally changing who you are, it’s about developing habits around money that are healthy and enjoyable, not intense or austere. Set a few spending goals, research to your heart’s content, and then use some of your hard-earned money for something you’ll enjoy!

Freelancers, Plan for Your Future

Producers usually kick ass with retirement savings, so if you’re self-employed, make sure you’ve got a retirement plan that lets you max out tax-deferred growth. For example, a SEP might give you (much) more room to sock away contributions than a regular or Roth IRA. If you’re employed with a company that has a retirement plan, double-check that you’re maxing out your contribution (in accordance with your other goals — make sure you have a safety net and have paid down any credit card debt). Use your natural tendencies as a springboard to geek out on tax savings and retirement options to be sure you’re truly making the most of your opportunities for long-term growth.

Recommended Next Steps For

The Connoisseur

Focus on Conscious Spending Goals

Choose items and experiences you’re dying for and save for them with a goals-based approach. Make sure to set both short-term and long-term goals. Then focus your reward system in a way that makes you feel encouraged, not deprived. Short-term goals are those that are less than 2 years away, and longer-term goals can range from a couple of years away to a long-reach goal, like retirement. For example, don’t skip your latte if it brightens your day, but do focus on staying out of Nordstrom until it’s time to buy the bag you truly want.

Think About the Long Haul

Remember that life is, in part, an endurance race — don’t exhaust yourself on splurges in the short term and wind up empty-handed in the longer term. That may mean that you may skip a day trip to the spa because you know that money will look better years from now when the power of compounding interest has expanded it into part of a down-payment for your dream home.

Create A Paycheck Just For Spending

For connoisseurs who can’t stop swiping, tapping or plugging in their credit card numbers online, it’s a good idea to automate monthly savings and create an internal “paycheck” — pay yourself after you’ve allocated money to savings and fixed expenses, then allow yourself to spend comfortably from your discretionary allowance.

Go through your expenses for the past 3 to 6 months to get a good idea of what you’re spending, and establish which expenses are “core expenses” or needs (rent or mortgage, utilities, car payments, groceries). Then look at your flexible spending on wants, like manicures, meals out, clothing, gym membership. Rank those wants in order of importance to you, and hold on to that list.

Next, check out areas where you could be benefiting yourself more, like contributing more to a 401(k) plan, paying down debt, or building up savings. Your “paycheck” will be the money remaining after you’ve set aside funds for your core expenses and your savings goals. Use your “paycheck” to address your wants, keeping your rankings in mind before you unconsciously splurge on something beyond your reach.

GET CLEAR ON DEBT

There are good debts — the mortgage for the house that puts a roof over your head, the loan for the car that gets you back and forth to work, reasonable student loans — and not so good ones. The latter are for things you want rather than need. Connoisseurs need to be particularly mindful of going deep into debt to finance these wants. Whether you’re trying to keep up with a coworker or just treating yourself, it’s easy to supplement your income with credit cards. If you’ve already built up debt, prioritize paying off the cards with the highest interest rates first.

COME TO GRIPS WITH ENOUGH

If you’ve worked hard and created a life you love, it’s understandable to be nervous about losing what you have, or to feel as though you might never arrive at the lifestyle you truly want. This can cut a couple of ways. You might think you’ll never get to where you want to be, so you figure you may as well just spend all you have now. Or you can be so nervous about losing what you have that you try not to think about it at all.

Combat any anxiety about reaching and keeping the lifestyle of your dreams by creating a saving and investing plan. Focus first on a short-term savings account to keep you out of debt if something unexpected happens, and then start adding to your investments over time.

Don’t Forget About Tomorrow

Living for the moment is an admirable quality, but make sure you prepare for tomorrow as well. Did you know that you can actually increase the amount of money that goes into your pocket by contributing to your retirement plan, especially if you have an employer match? Again, focus on long-term, medium-term, and short-term goals, and don’t forget about your future self. Having these goals and working toward them is a proven happiness booster. Then, let the power of compounding interest and tax deferral score you an amazing trip in retirement!

Recommended Next Steps For

The Visionary

Make Your Safety Net

Since Visionaries are willing to take risks in order to live inspired lives, it’s important for them to create their own safety net. Having a short term cash reserve is imperative for Visionaries who don’t want to feel beholden to an employer or partner. They need to know they have the support to make a change in course without disrupting their entire financial lives. Go through your expenses to figure out your baseline monthly costs, and then aim to save a safety net you feel comfortable with. Depending on your risk tolerance, this could mean 3 months or a year.

Read the Fine Print

Visionaries are delighted when investors and supporters validate their efforts. It can feel amazing to have someone want to invest in your idea, but it’s crucial to read the fine print and do some due diligence before hopping into bed with any investors, regardless of how angelic they may seem.

Visionaries need to kick the tires before putting pen to paper on an investment partnership or even a business credit card deal. In other words, make sure you know all the terms before you sign on. When presented with an opportunity, walk through it fully to understand the repercussions. If you’re considering an investor or financing, map out what that looks like going forward, using professionals like attorneys or financial planners for help.

Ever Heard of a SEP?

If your dreams have led you to self-employment, take charge by implementing your own retirement plan. It may seem like something only big companies do, but nooooo. When you work for yourself, you’re the only safety net you have. And although you can go the traditional or Roth IRA route, you have options to stash away more. Check out the oh-so-valuable SEP IRA as well as a solo 401(k), or SIMPLE IRA. Work with your tax preparer to understand which type of plan best suits you. Doing so can mean saving serious money on taxes and providing your future self with a lot of well-earned cash flow.

Don’t Forget About Taxes

If you’re working on the side and have a full-time gig, make sure you set aside savings for taxes so you don’t have any surprise consequences for your creative work. Know what you’ll owe and save for taxes on a regular basis. Don’t just promise yourself you’ll think about it later. PS: Your freelance income may also allow you to put away even more for retirement and save taxes while doing so!

Balance Your Risk

All investing comes with some degree of risk, and it’s important for Visionaries to understand the risks involved in their investments. If you’re already taking on a lot of risk by being freelancing or starting your own company, try to balance that risk on the investment side: Think a diversified portfolio rather than snapping up a share of a friend’s new restaurant. Take a global risk snapshot and see where you need to get a little more conservative to counter some of the exciting endeavors you have planned.

Recommended Next Steps For

The Nurturer

Put On Your Own Oxygen Mask First

Nurturers are exceptionally giving and kind, focusing their spending on their loved ones and cherished causes. Altruism is an incredible trait that we can all learn from, and money isn’t just for investing in companies or belongings — it’s a tool to invest in and support those you love.

However, it’s just as important to remember what flight attendants tell you when you’re desperately texting and trying to shove your purse under your feet: Put on your own oxygen mask before you assist others. This is especially crucial for Nurturers.

Create A Personal Safety Net

Review your expenses for the past few months to understand your monthly expenses, and don’t forget other items that aren’t monthly, like tax payments. Then set aside a regular amount into a safety net account that will keep you going if you have a big expense or lose income. Depending on your risk tolerance, job security, and income stability, this could range from just 3 months’ worth to a year’s worth of expenses.

Don’t Go Into Debt for Others

Compound interest can work for you and against you. Don’t use your credit cards to finance gifts for or sabotage your finances by providing loans you can’t afford for loved ones. If you find yourself bailing out a lot of people — or using resources you know you need for yourself -- redefine what an emergency is and set clear boundaries

Prioritize Yourself to Keep Relationships Healthy

If you’re a parent, make sure you’ve prioritized your retirement before you focus on funding your children’s college fund. Your kids can get loans — not a dream, we know, but better than you sleeping on their couches when they’re older. If you’re in a relationship with someone who earns less than you, it may be easy for you to step up to pay for more because, well, you have more. That’s fine, assuming you’re maxing out your retirement contributions, aren’t racking up credit card or other consumer debt, and have a decent savings account balance.

Make a Support Budget

Nurturers can benefit from a goal-oriented plan that allows them to support people and causes they believe in without getting pulled under water. Consciously carving out charitable donations for causes you believe in and setting goals and limits for gifts and support for loved ones can help Nurturers develop a “support budget.” It’s not about saying no, it’s about supporting your own future so you can continue to help the people you love for years to come.

Recommended Next Steps For

The Independent

Take Control

Instead of following the crowd, Independents tend to develop their own rules, in life and in money. This desire for freedom and choices can often lead Independents to the ostrich approach to financial management — if you don’t see it, it’s not something you have to deal with. Whether you experience analysis paralysis or simply have trouble reconciling money with who you are as a person, as an Independent you can can shy away from taking charge of your own finances. Sidle up to the table and don’t be afraid to ask questions to make sure you’re engaged in your own financial life.

Rethink the Way You Think About Money

Delegating the detailed analysis and planning can be helpful for Independents, and it can alleviate some of the stress and anxiety involved in making financial choices and establishing a plan. Think about it this way: If you have savings and investments, you can use the money to leverage even more freedom in your life.

A former hedge fund manager I know often referred to his savings cushion as “f—k you money.” As in, that cash gave him the ability to wake up each morning knowing he could tell his employer where to shove it without worrying about making his mortgage payment. If it helps, rename your savings fund accordingly.

Try Investing With Your Values

If investing feels too corporate or impersonal, consider values-based investing. Often referred to as ESG investing (ESG stands for environmental, social and governance), this allows you to support companies line up with the things you value. And, unlike in past years, research shows you no longer need to compromise on returns. You can do well and do good simultaneously.

Take One Step Towards a More Secure Future

Dreaming of taking amazing vacations and traveling the world in retirement? In order to be the you that you dream of being in the future, you’ll need to fund these excursions. Saving now (particularly in tax-advantaged accounts like 401(k)s and IRAs) can be the difference between having to keep working and being able to set sail on your own adventure a few years early.

If you’re self employed, research (or delegate the research to a professional) the best retirement plan options for your individual situation. If you are employed by a company that offers a retirement plan, focus on at least contributing enough to get any match you’re offered, and then max out your contribution (on balance with your other goals, like paying off high rate debt and building your short-term savings).

Put It on Autopilot

Think big picture, get help setting the goals, automate, and then go back to what matters most in your life. Take some time to go through your short term (2 years or fewer) and long term (2 years or more) goals and determine how much you’ll need to save for them. Go through your expenses to make sure your core expenses and needs are covered, and then automate your savings contributions and a regular “paycheck” of the remaining income to yourself for discretionary spending (aka spending on your wants). The more you can put your savings and spending, especially bill payments, on autopilot, the more time you’ll have for the good stuff.