Ask a Financial Adviser: 10 of Your Most Pressing Money Questions, Answered

Updated 10/17/18
Questions to ask a financial adviser
Melodie Jeng/Getty Images; Original Graphic: Viviana Duron

Although Equal Pay Day was on April 10, we've been continuing the conversation all month long here on MyDomaine. From broaching the taboo topic of salary negotiations to putting money-saving apps to the test to shining a light on the "maternal wall," we've been gaining inspiration from trailblazing women and taking control of our finances. (Well, at the very least, we've gained the confidence to check our bank account more frequently—and that's something.)

To close out our month-long initiative of bringing you content about financial freedom, it only seemed fitting to have an expert answer all of your most pressing money questions. So we put out a call for submissions via our Instagram Stories, and as always, our insightful, hilarious, and curious community did not disappoint. Then, we took your questions and tapped money-savvy Kristin O'Keeffe Merrick, a financial advisor at O'Keeffe Financial Partners, to answer all your most urgent inquiries.

From how to get started in investing to whether or not you should be contributing to a 401(k), here are all the questions you DM'd us on Instagram, answered.

What should I do with my IRA?
Original Graphic by Viviana Duron

The Long Answer: "One of the most important things for you to do is to make sure your money is invested and not sitting in cash or a cash alternative," says Merrick. "If it's already in an IRA at an institution, call them and ask them about your investment options. If you are not pleased with their options, or they are not offering you the help you need, consider moving to a place that will actually help you do that," advises Merrick.

The Bottom Line: Get invested now.

Should I contribute to a 401k?
Original Graphic by Viviana Duron

The Long Answer: "The 401(k) is a fantastic retirement plan, and it offers many attractive incentives," explains Merrick. "First, if your employer matches your contributions, you are earning 'free' money. But even if your employer does not match, you are still able to put up to $18,500 of tax-free money into the account every year," she adds. "By making tax-free contributions, you are lowering your taxable income each year and could potentially pay less in taxes because of it. Also, your 401(k) contributions grow tax-deferred. Tax-deferred growth means that the money invested will compound at a higher rate and grow faster than taxable money."

The Bottom Line: Contribute to your 401(k).

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How do I save for retirement?
Original Graphic by Viviana Duron

The Long Answer: "You have several options to make retirement contributions even without a 401(k)," assures Merrick. "First, depending on how much money you make, you could potentially make a contribution to a Roth IRA. A Roth IRA allows you to make a $5500 a contribution of post-tax dollars each year, but it grows tax-free," she explains. "This means that when you want to withdraw the money when you're 59.5 years old, you do not pay taxes on it."

"The income limit for someone filing single is $118,000. You can also make an annual $5500 contribution to a traditional IRA, regardless of your income level," she adds. "If you make less than $62,000 a year and file as single, you may be eligible for a tax deduction. If you are self-employed or make 1099 income, you could be eligible for a SEP IRA. This allows you to put away up to $55,000 a year or 20% of your adjusted gross income (whichever is less)!"

The Bottom Line: Anyone earning an income can make a contribution of up to $5500 to an IRA every year.

How much should I save out of each paycheck?
Original Graphic by Viviana Duron

The Long Answer: "The key to budgeting is first to understand your spending habits. Go back and analyze your spending over the past six months," offers Merrick. "Everyone has fixed costs and variable costs. Fixed costs are things like mortgage, rent, cable bill, car payment, insurance. Variable costs are things that change from month to month, like dining out, traveling, and shopping," she explains. "Getting a good idea of your fixed costs is crucial—they won’t change and will, therefore, become the foundation of the budget."

"The variable costs are what you need to focus on," she elaborates. "This includes how much you're spending each month on things like beverages, car services, and takeout," Merrick explains. "By identifying the areas that you can control, you are also identifying the areas for improvement."

"Make sure that you are being realistic about your budget," Merrick advises. "If you spent $300 on coffee last month, don’t try to make a $50 budget for this month. If it’s not realistic, and it won’t work," she explains. "Make sure you are tracking your spending at least once a week (but ideally it should be at least two times a week)."

The Bottom Line: Know where your money is going each month before you try to make a strict budget.

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What's a realistic finance routine?
Original Graphic by Viviana Duron

The Long Answer: "In a world that is rapidly becoming 'cash-less,' it is crucial to monitor our spending frequently," says Merrick. "Creating an effective finance routine is just like any other discipline. It requires good habits and hygiene," she explains. "In order for you to create a good routine, you need to track your spending, but if everything is cashless or done with a credit card, this becomes a more and more difficult task," she adds. "Start by creating a bi-weekly date with your finances," Merrick suggests. "Go through your spending on Monday (after the weekend) and Friday (before things get crazy again). Make sure you made all the purchases on your cards and then identify areas of improvement or ways you can cut back," she adds. "If you don't know where your money is going, you can't stop the bleeding!"

The Bottom line: Create good habits for yourself and work on your financial hygiene.

How should a 30 year old think about saving for retirement?
Original Graphic by Viviana Duron

The Long Answer: "The simple answer to this is that you have to contribute to a retirement plan," advises Merrick. "Even if it's just a little bit each month, it will make a difference over time. If you have an employer-sponsored plan, like a 401(k) or a 403(b), start making contributions to that," she suggests. "Otherwise, explore options like a Roth or traditional IRA," she adds. "If you're self-employed, open a SEP IRA. Start small, and increase the monthly amounts if you think you still have the capacity to do so. Aim to add at least $5500 a year if you can," she advises. "Aim for 5% to 10% of your income."

The Bottom Line: Even if you can't afford to save a large sum, start small and get invested.

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What's the minimum I should be saving every year?
Original Graphic by Viviana Duron

The Long Answer: "This will obviously vary from person to person, but in my opinion, the goal should be to save 10% to 15% of your income each year," suggests Merrick. "If you make $100,000 and you aim for 15% savings, I'd like to see about $8000 go to your 401(k), $5000 go to your savings, which will eventually become taxable investments, and $2000 go to your emergency fund," she advises. "This will vary based on your cost of living, your debt makeup, and your family obligations," she adds. "If you're young, unencumbered, and have no debt, please save as much as you possibly can afford."

The Bottom Line: Save something from each paycheck.

How do I start investing?
Original Graphic by Viviana Duron
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The Long Answer: "There are many great investing platforms available today," says Merrick. "If you're just looking to invest a small amount of money, one of these platforms might be right for you," she suggests. "Make sure to go through them all, read about their services and investment options, and make sure you understand how they work and how they make money (how is the fee structure set up?)," she adds. "If you want to invest a larger sum of money, I suggest you speak to a financial advisor," she explains. "Investing is complex and could be risky. It is not a DIY project."

The Bottom Line: Investing is important. Do your research, seek out help, and don't be afraid to seek professional advice.

How do I pay off a mortgage?
Original Graphic by Viviana Duron

The Long Answer: "Mortgages can be very complex and overwhelming," confesses Merrick. "Savvy investors are always testing the waters to see what their mortgage options are," she says. "My suggestion is to find a mortgage broker you trust and have them run several refinance options for you. They can outline what your new tenor, rate, and payment plans would be," she explains. "This allows you to make a smart decision based on real numbers."

"Remember this: The more you pay each month, the more actual 'equity' or ownership you have in your home," Merrick notes. "The higher the equity, the more you will get back when you go to sell the home. Higher equity raises your net worth, reduces your liabilities and increases your ability to borrow against your home or buy a second home."

The Bottom Line: Seek professional advice when you want to refinance and understand all of your options.

How do I start investing?
Original Graphic by Viviana Duron

The Long Answer: "Life insurance is a good idea if you have debt, have a spouse or family, own a business, or have someone that depends on you financially," says Merrick. "Depending on your age and health, term life insurance could be an inexpensive solution for you. When you buy term insurance, you buy it for a specific time period (usually 10, 20 or 30 years). You pay an annual premium and once the term ends, so does the policy," she adds.

"Whole life insurance is a permanent product," Merrick explains. "This means that you pay a higher premium compared to term each year, but the premiums start to accumulate as 'cash value'. Over time, the cash value and the death benefit grow. At some point in the future, you can actually begin to draw on the cash value, which will then reduce the death benefit of the policy," says Merrick. "I generally recommend some version of both a term and whole policy, especially for those who have families, debt or dependents."

The Bottom Line: Life insurance is extremely important if you have a family or loved ones that rely on you financially.

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O’Keeffe Financial Partners is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.

1 401(k)may be subject to fees. The distribution on a regular 401 are taxed as ordinary income. Distributions on a 401(k) may be taken after the age of 591/2. Early 401(k) distributions may be subject to a 10% penalty and taxes. 2 Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment Advisory services offered through Raymond James Financial Services Advisors, Inc. Opinions are of the author and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide advice on tax or legal matters.

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