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Financial Decisions That Shape Your Future by Susan Michel

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Financial Decisions That Shape Your Future by Susan Michel, Founder and CEO of Glen Eagle

Now is the time to reflect on the complex decisions that impact business owners in the overlap of their personal and professional lives. In conversations with fellow entrepreneurs, I've noticed some common money-related questions that keep coming up. These questions show how challenging it can be to grow our businesses while caring for our personal money needs.

Question #1: Should I prioritize funding my retirement or saving for my child's education?

This question has become increasingly pressing for many parents, especially in light of recent studies showing a shift in savings priorities. It is hard to find the balance between giving to others and saving for your own future needs. We always say the greatest gift you can give your kids is to never have to ask them for money later in life. 

The Shifting Landscape of Savings Priorities

Recent research from Fidelity shows that there has been a significant change in how families are allocating their resources. In fact, for only the second time in the study's 17-year history, parents now prioritize saving for their child's education (73%) over saving for retirement (62%). This change highlights parents' concerns about rising education costs and their desire to secure their children's futures. But it also raises an important question: As parents, are we compromising our financial security in our later years?

The Importance of Having a Plan

One statistic stands out: over one-third of parents (36%) do not have a financial plan to meet their goals. Just like in our businesses, planning is not just important; it's crucial for our personal money. If we don't plan well, we might not save enough for our own retirement or to help our kids with college. It does not necessarily have to be one or the other. If we plan ahead, we can help save for both important goals.

Finding the Right Balance

How do we balance these competing priorities? This is the key to successful financial management. There is no one way, as everyone's situation will be unique to their situation, but these are some things to think about:

  1. Secure your own oxygen mask first: Make sure you're saving enough for retirement before putting money aside for your kids' college. Remember, you can borrow for school, but not for your retirement!
  2. Use tax-advantaged accounts: Max out your retirement accounts like 401(k)s and IRAs before you start saving for education. This can save you on taxes and help your money grow faster.
  3. Leverage 529 plans: 529 plan rules have changed, and you can use them for other expenses now. That's why they're becoming popular with more families.
  4. Involve the whole family: Encourage grandparents and other family members to contribute to education savings as gifts. This can help increase savings without compromising your retirement goals.
  5. Teach financial literacy: Talk to your children about college costs and savings. Not only will this help them understand money better and make smarter choices about their education, but they will also learn skills they will use long after college.

Question #2: Where do I stand financially compared to my peers?

Although comparing your finances to people in your age group can give you a clearer picture for planning purposes, it is also important to recognize that everyone has different needs. Depending on your expenses, you may need more or less savings than someone else in your age group.  As you can see from the numbers below, there are wide ranges. The most important thing is to plan and save, even if it is just a small amount.

Net Worth Comparisons

The Washington Post recently published a calculator that allows Americans to compare their net worth to that of their peers. As of 2024, the average net worth of U.S. families is about $1.06 million, while the median is $192,700. You can see the wealth gap is continuing to expand when looking at the fact that about 8% of households have a negative net worth, while about 1 in 10 hold more than $2 million. These figures provide a reference point for your own financial position. Some ways to improve your own net worth might be the following:

  1. Make a plan to pay off debt. Credit card debt has continued to rise, and it is easy to get out of control. It is important to plan how to pay off debt so you do not hurt your long-term savings.
  2. Grow your money through smart investments: be focused on the long-term investments, not timing the market. Good diversification across your investments and low-cost investment options can help your portfolio grow regardless of the short-term market returns.
  3. Increase your income: As business owners, we tend to put everything back into the business. It is important to pay yourself and find ways to get money out of the business (into retirement plans) when possible.
  4. Be patient and consistent: the most important thing is to start today. Even a small investment amount can go a long way. The only bad decision would be to do nothing.

With careful planning and the ability to adapt, we can save for retirement and help pay for our kids' school while continuing to grow our companies. It's not always easy, but by doing so, we can solidify a bright financial future for ourselves and our families.

I am the founder and CEO of Glen Eagle Advisors, LLC, an SEC-registered investment advisor located in New Jersey. Offering retirement planning to business owners and wealth management, Glen Eagle takes an educational, holistic approach to meet clients’ long-term goals. Glen Eagle Advisors, LLC is an SEC-registered investment Advisor www.gleneagleadv.com https://gleneagleadv.com/firm-disclosures