When it comes to helping your clients work on their financial goals, there's no doubt they'll have plenty of questions. One of the most common is how much of their salary they should save.
This question presents a great opportunity for you to walk your clients through a little bit of financial education as you help them prepare for retirement.
Help them do the math
Some financial professionals suggest setting aside 10-15 percent of your annual income toward retirement. But every client is different, which makes it virtually impossible to find a one-size-fits-all answer to this sort of question. What you can do is sit down with your clients to discuss their short- and long-term goals.
With this hands-on approach, you're doing a couple of important things: First, it's a great opportunity to help your clients understand where their after-tax income is going; you can highlight how important it is to set aside funds each month for savings and paying debt.
Second, it's giving your clients the tools that will financially empower them. You can set up a spreadsheet or online calculator that shows their income after taxes and expenses; from there, you can run through scenarios of needs, wants and savings plans that show how different levels of saving can impact their long-term goals, including their 401(k) and other retirement accounts.
Encourage planning
You can also encourage your clients to work on their planning and budgeting. Maybe they don't have any idea of what they are spending each month — that means this conversation around saving is the perfect jumping off point. Have your clients track their spending for a month or two and then set up another appointment where you can go over the numbers.
Consider sharing these savings tips with your clients:
- Automate savings to ensure that a set amount will make it into their savings accounts. This will reduce time spent number-crunching.
- Have a percentage of their paycheck deposited into a checking account and another percentage into savings.
- Remind them to "pay yourself first" before doing anything else with their paycheck.
- Establish a budget they can stick to. By cutting back on discretionary expenses, such as a dinner out or shopping excursions, they can put toward more savings.
For your clients who already take their budget seriously, you can set aside time for annual reviews. Here you can review figures together and make sensible adjustments for the future and long-term goals such as saving for a child's college education or their own retirement.
Stay in touch
Make sure you check in with your clients beyond your scheduled appointments, which may only happen a few times a year.
You can stand out from the crowd by contacting your clients regularly and inquiring about recent financial changes. For example, maybe your client received a big raise at work or one of their parents became sick and is now living with them. Both of those changes may impact how much of their salary they save, their budget and potentially their retirement plans.
Knowing these shifts — and helping your clients plan accordingly — can go a long way to building a great relationship for years to come.
Every financial professional wants their clients to live their best possible lives. Learn more about how you can help them make smart financial goals.
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