As I mentioned in my previous blog, I started to take control of our finances because I wanted to provide for my family and future. The future includes not only making sure that our daughters have a stable future; we need to plan for our retirement.

But where to start retirement planning? It all begins with you taking control of your finances. As Marcus Lemonis famously says, "If you don't know your numbers, you don't know your business." The same thing applies to your finances. If you don't know your numbers, you don't know how to plan retirement.

Here are six steps to start retirement planning

So the first step is to do a full audit of your financial system. Figure out where all the money is coming in and where all the money is going out. Knowing where your money is going can be eye-opening. For example, I just did a mini audit, and I realized I was spending around 15 dollars 1 to 2 times a week for my favorite lunch meal from Wendy's, which adds up to on average of up to 120 dollars a month. From there, you know where you can cut back and redirect the money to somewhere else, such as a retirement account.

The second step is in retirement planning is to create a spending plan, savings plan, an investment plan where you can forecast how much you need to get by every month then invest the rest into the retirement account. For example, you know that, on average, you will need around 5000 dollars a month to cover the bills, and your monthly income is 6000 dollars. So, for that extra 1000 dollars, you can redirect some of the money into your retirement account. Depending on the life spectrum, start baby steps if you can. The younger you are, you can get away with the smaller monthly investments in retirement. The older you are, the more significant monthly investing into retirement is required.

A savings plan is where you can set your money aside for savings. It could be for an emergency fund, play money, hospital bill, or whatever you want to save. Then, as you do your audit, you find out what is your bare minimum monthly bills and take that number multiplied by six months to twelve months. The goal is to build up a savings account that would last you six months to 1 year of an emergency fund. With this goal, it allows you to float from anywhere six months to twelve months if shit hits the fan. The point is to keep the money for later use in a financial pinch.

An investment plan is where you can set your money into a retirement account and watch your money grow. You need money to make money, and without the investment plan, you will end up with nothing for retirement. The investment plan is the fun part of retirement planning. You get to create whatever future you want.

You get to imagine what you want your future to look like when you retire. For example, in many cases, you would like to travel by the time you retire, or you want to be closer to your kids so you can be spoiling your grandkids with love. Utilize this part of the retirement plan as your vision board to envision what you want when you retire. Once you establish your vision board, you can start figuring out the cost of retirement. For myself, I'm passionate about craft beer, especially local craft beer. So I imagine myself having around five hundred dollars allowance monthly on whatever beer I want to try. So I add that and all other costs that I want to do in retirement and multiple by twenty years. Here below a short example:

• $500 a month x 12= $6,000 (Craft beer allowance)

• $400 a month x 12 = $4,800 (Foodie Allowance)

• $300 a month x 12 = $3,600 (Spoiling grandkids)

  • Total is $14,400 x 20 (years) =$288,000

The purpose of twenty years is when you officially retire at 59 1/2, you have another twenty to thirty years to live. You don't have to retire at 59 1/2; you can retire at 65 if you like. In fact, the longer you leave it in your retirement account, the more returns you will get. This exercise allows you to establish a goal to build your retirement account to support what you envision.

The third step is finding the right platform to utilize your retirement account. Different brokers have their platform, and you want to make sure that it makes sense. If the platform is not user-friendly, you are more than likely not to use it and may not want to invest in it. I'm a little more tech-savvy, and I like techie things. So the platform that I use has more complex features that show how my retirement account is growing.

Another criteria for platforms is to ensure that you are not paying a monthly fee or subscription to utilize the platform if you plan to do it yourself. However, if you don't want to do it yourself and rather have someone else do it, look into Robo profiles where you set your options, and the system automatically builds your portfolio for you. And if you don't trust the automatic system and want someone to manage your portfolio, then you should be paying a flat rate fee, not a percentage tied into the performance of your portfolio.

The fourth step is to build your financial infrastructure. Before the traffic lights were popular, some people directed traffic in traffic back in the day. Well, the same thing applies to your money. You need to lead your money to different bank accounts by taking control of your finances.

You would need three separate accounts at a minimum: checking account, savings account, and investment account. I recommend having those accounts by different individual companies because you want to have a lag factor in your infrastructure. For example, a checking account with a US bank, a savings account with Ally, and a retirement account with TD Ameritrade; once you transfer the money from a checking account to a savings account, it would take around 2-3 days to process it one way. So it forces you to consider the transfer carefully, providing a cool-down buffer. A cool-down buffer means when you do the transfer, you could be on an emotional impulse. So it gives you 2-3 days to cool down about it, and you are used to the money being transferred.

A checking account is where all of your money lands first. It allows you to keep track of where all your money is coming in. If you have multiple checking accounts, it can be overwhelming to keep track of your money. If you have numerous accounts, I suggest consolidating them into one account.

A savings account is where your money goes into saving mode. When you transfer your money into savings, it separates from the cash you need to pay the bills and to save. It allows you to have that division so you don't accidentally overspend your monthly budget.

An investment account has two different approaches: Traditional IRA or ROTH IRA. Traditional IRA is where you take your pre-taxed money and put it in an investment account. However, you will get taxed when you withdraw money from that account. So keep in mind when you are allowed to withdraw the money, which is at minimum 59 1/2, you are in a different tax bracket. ROTH IRA is where you take your already taxed money and grow your money in the investment account. Then, when you withdraw the money, you don't get taxed because it's already been taxed.

I would always recommend utilizing the ROTH IRA account whenever possible. But sometimes you only have one option through work. In that case, I would recommend using Traditional IRA through your work because once your money lands in your checking account, the money has already been taxed. Also, it brings your taxable income down, which leads to paying taxes less. However, I recommend using ROTH IRA after the money lands in the checking account. That way, you don't have to worry about paying taxes at a later date.

The wonderful thing about technology today is that you can set up automatic withdrawals between accounts, credit card payments, or any accounts you deem essential. For example, from your savings account, you can set up an automatic withdrawal from your checking account. Once you set up the automatic withdrawal, the system does it for you on the backend. Basically, you set it and forget about it. Over time, the system does the work for you, and you only need to check in on a weekly or monthly basis.

The fifth step in retirement planning is implementing your spending, savings, and investment plan. Implementing your plans allows you to keep track and measure where you stand. In addition, sticking to the plans keeps you in check to be prepared for the future. What's the point of creating a spending, savings, or investment plan if you are not implementing it?

The sixth step is to repeat this process on an annual basis. Retirement planning is not a one-stop shop. Life is constantly changing over time, and you need to have the ability to adapt. For example, if you started when you were young, you could be aggressive with the stocks, but if you started when you were older and needed income as soon as possible, you need to be conservative with the stock market.

I started my retirement planning around two years ago. I remember that the first year that I knew and understood that I needed to start investing in the stock market soon as possible. So I focused on finding the right companies to stake my money on, and I watched it like a hawk (which you are not supposed to). But I didn't want to lose money because it was unknown territory.

Once I got used to navigating through the stock market, I created a goal to reach one million dollars in the stock market when I retire. Then, I put together a spreadsheet to see when I would achieve my one million dollar goal if I did not contribute anything further to my retirement account and an average of eight percent returns. It would take me around 57 years to accomplish that goal and not take any money out, making me 91 years old. However, if I contributed $100 a month, it shaved off ten years. So the more I contribute to my account, the more I close the gap towards my goal.

Review on how to start retirement planning

1. Full audit of your financials.

   1. Know where your money is coming in and out

2. Create spending, savings, and investment plan.

   1. A spending plan- figure out your bills and see where you can direct your money.

   2. A savings plan- save money for later use.

   3. An investment plan- figuring out how much you can contribute to the account for your retirement.

3. Find the right platform.

   1. Make sure its user friendly for YOU.

4. Make sure it is not costing you anything.

   1. Build your financial infrastructure.

   2. Use technology to automate your transfers/withdrawals.

5. Implement your spending, savings, and investment plan.

   1. Stick to the plan and watch your retirement account grow.

6. Repeat.

Final Thoughts: How to start Retirement Planning

I don't know where you are in life, whether in college or already have a promising career. But, if you have not yet started planning for your retirement, you need to jump on it as soon as possible. Sooner the better because you want to start building your wealth.

Just answer this question, "If you stop working today, how long can you last with your current situation and lifestyle?" Two years ago, my answer was zero, which shook me to my core. I know that I cannot work for the rest of my life, and I want to have an easy 20 years at the end of my life spectrum.

Well, go on, get started! Until next time.

 -DJ Everton-Lovell

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"Unshakeable: Your Financial Freedom Playbook" by Tony Robbins.

"Money Master the Game: 7 Simple Steps to financial freedom" Tony Robbins.

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