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Are You Sure You Can Save Enough For Retirement?

Are You Sure You Can Save Enough For Retirement?

25% of Americans aren’t saving anything for retirement. Are you one of them?

Thankfully, it’s not too late to catch up, but whether you’re twenty-two or fifty-two, the earlier you start, the better off you’ll be.

Here are some simple strategies to get you on the path to a more secure financial future, including savings expert Dave Ramsey’s Top 3 recommendations for catching up if you’re behind:

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1. Invest in Your Company’s 401K Plan.

A 401K allows you to save pre-tax money in an account that allows you to earn compound interest tax-free. When you retire, you can withdraw the money and it is then taxed like normal income (early withdrawal can carry a hefty penalty, however). Microsoft’s website even offers a helpful Excel-based 401K planning template to get an idea of how much you should start with, what you should contribute, and how raises and company matching can affect contributions.

2. Invest in a Roth IRA.

If your company doesn’t have a 401K plan, think about opening a Roth IRA, which allows you to save after-tax money in a retirement account. Unlike a 401K, money saved in a Roth IRA isn’t taxed when it’s withdrawn, which can have its advantages. If you can afford to, consider investing in a Roth IRA and your company’s 401K.

3. Seek Out Sound Financial Advice From a Certified Financial Planner.

Check out the CFP website for someone in your area, read Yelp reviews and Better Business Bureau feedback, or ask a friend or colleague to recommend someone. A good planner will review your goals and progress with you annually, if not quarterly, to make sure you’re still on track.

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4. Check Out These Ten Great Retirement Books.

These books (in the link) will give you some ideas and get you thinking about what you want your retirement to look like. Do you want to be on a beach? Is travel important to you? How many mortgage payments will you have left?

5. Visit the AARP Website’s Free Online Calculator.

AARP gives you a personalized snapshot of your financial future, based on your current lifestyle. The more you know about what you can and can’t live with, the more motivated you’ll be to sow now what you can reap later.

6. Make it Easy.

Planning for retirement doesn’t have to be complicated or difficult. If you put systems in place to automate your financial goals, you won’t have to think about them. The system will take care of them for you!

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7. Get Your Head in the Right Place.

If saving is hard for you, it might be time to be honest with yourself about your money habits. Do you have any attitudes that might be sabotaging your savings strategies?

8. If You Don’t Already, Get Used to Living Within Your Means.

You’re not going to have a choice when you’re living on a fixed income, so cultivate this habit now before it’s too late.

9. Pay Off Your Credit Card Debt.

Even if you can’t pay off your mortgage before you retire, retiring with credit card debt isn’t smart. The interest you’re paying on your debt is likely to be much higher than the interest you’re earning on your retirement accounts!

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10. Learn How to Customize Your Investments.

Did you know that many 401Ks and Roth IRAs offer options for customizing your investments? These customizations allow investors to select the specific funds they want their money going into, which can run the gamut from high-fee managed funds to low-fee Index Funds. The mix you choose to invest in can cost or save you thousands, if you’re willing to do a little homework.

Getting started is the hardest part, but once you take that first step, time will be on your side. Cultivating good money habits, being willing to learn, and putting systems in place to do the heavy lifting for you can ensure that your retirement is secured, and your golden years are happy ones.

Featured photo credit: Markgraf-Ave via pixabay.com

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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