Updated: Aug 13, 2020
Retirement might feel far off for you -- but it is never too early to get started preparing today! Here are a few tips and things you can implement now to help better prepare yourself for retirement tomorrow.
Calculate Your Savings Goal
Determine how much you anticipate you will need to live off of once you are retired, and then budget slightly more than that to be safe.
A typical amount to set aside is 10% to 15% of monthly income towards retirement savings. With the crazy times we have had recently, it might not hurt to set aside even more than that if you can afford it!
The key to saving money successfully is reverse prioritization. Each month when you are paid, take out the amount you are going to put in savings first and deposit that into your savings account or investment portfolio before deciding on the rest of your budget for groceries, gas, entertainment, etc.
Employee Retirement Plan
Does your employer offer a 401(k), Roth IRA, or Traditional IRA account? If they offer to match your contributions, do your best to max out those matched contributions each year and do not touch those funds once they are in that account.
If possible, set up automatic paycheck deductions to go straight into the account(s) and take off another 10-15% on top of that for your own personal savings strategy.
Does your employer offer a health savings account or flexible savings account? Often times you can set up recurring paycheck deductions to contribute to these accounts and reduce your taxable income, allowing you to save more money each year and use it when you need it for the important things down the line.
Pay Off Debt
Pay off your debts as quickly as possible so you do not have any when you go into retirement. Start with high-interest credit cards and work your way through student loans, car payments, orthodontics/dental, etc. until you are eventually debt-free.
Living in retirement with debt over your head is one concern that you should not have to worry about. Do your best to live well below your means knowing that the delayed gratification will be worth it when you have less to concern yourself with during retirement.
Reduce Unnecessary Spending
We all love our daily coffee fix, but do we have to spend $3.50 each time we get a cup of coffee? By purchasing our own coffee beans and grinding them, we are able to fix multiple pots of coffee for only a fraction of the cost.
Finding small things like this throughout your daily rituals and routines is a great way to add up pennies into dollars. It's like with weight loss or backpacking, where the old adage of "ounces add up to pounds" rings true.
Purchasing things that are not perishable (i.e. toothpaste, toilet paper, paper towels, shampoo, etc.) on sale or in bulk are great ways to reduce the number of trips taken to the store and the convenience fee paid for when purchasing by the individual item. This is one of the tricks that Mark Cuban (noted billionaire and owner of the Dallas Mavericks) practices to this day, going so far as still stockpiling his toilet paper and toothpaste underneath his bed in the space that he would otherwise not use for anything else.
Cooking At Home
An American couple can expect to spend close to $20,000 per year just on eating out if they do not intend to cook any meals at home. That is more money spent on dining out than many people make in an entire year in some parts of the country and other parts of the world!
By cutting back on dining out and doing your own grocery shopping, you can bring that number down significantly and save that money for special occasions, emergencies, and the like. Imagine having an extra $10,000 - $15,000 each year to put towards your retirement fund or towards going on a beautiful vacation with your spouse.
If you are thinking about your future and want to be well prepared for retirement, start saving today and investing in yourself and your own future! Financial independence is important and helpful at any point in life, but at no point in life is it more important than in retirement.
Please don't hesitate to reach out to me with any questions or real estate needs you may have, and if you are looking to connect with someone to help you start saving for retirement or be better prepared, I would love to be a resource for you and to connect you to the right experts.