Are you achieving financial goals with your current savings plan?
Even if you adore your job, chances are you dream of hanging up your apron someday. The time to start saving is now, not several years down the line. You never know what life has in store, and the larger your nest egg when things are going well, the more security you’ll enjoy.
How can you get on track with achieving your financial goals for retirement? Taking a step-by-step approach minimizes your frustration while getting you to the finish line. Take the following actions this year to get on the path to retirement savings success.
1. Create and Pad Your Emergency Fund
While you’re focused on achieving financial goals, the most important thing to consider is making sure you prepare for the unexpected. Job loss and illnesses can derail anyone’s life. Most experts recommend that you set aside three to six months’ worth of living expenses.
Does that prospect seem challenging? If you have a tight budget, it can prove tough to save. Try these tips.
- Don’t show yourself the money: If you have direct deposit, assign an amount to go to savings each pay period — even if it’s $5. If the money automatically goes to your savings, you need to make a conscious choice to withdraw it.
- Don’t get a debit card for your savings account: Better yet, open your emergency fund at a different financial institution than your usual one. Don’t link your accounts. That way, you can’t spend without physically going to the branch to withdraw funds.
- Take on a side hustle: If you find a part-time job, have the income deposited directly to your fund.
2. Pay Off Debt
If you’re carrying a ton of student loans and credit card debt, your bills will eat through your savings if you need to use them before retirement. Playing down debt means minimizing your monthly expenses. Once you eliminate those bills, you have more money to devote to your retirement planning.
Select the credit card with the highest interest rate and pay it off first. Then, move on to the next. Once you begin freeing up additional funds monthly, dedicate the extra cash toward paying off remaining debt more quickly.
Similarly, while many sources of debt — like mortgages and student loans — are obvious and necessary, other debts can rack up your monthly bill more sneakily and unnecessarily. Consider whether each recurring charge or statement represents a need for yourself or your family. For example, the average household subscribes to four streaming services — does your family really need all the services you pay for, or would one suffice?
You should also consider how often you use the big-ticket items that make up your debt — like a vacation home or timeshare you barely use, or a project car you’ve been telling yourself for years that you would restore with little to show for it. These wishful purchases are often entirely unnecessary, so you may consider selling some of these larger expenses. For example, do you really need a vacation home or timeshare — an expense which costs an average of $20,000 — while a similar-quality Airbnb would suit your family perfectly well and cost thousands of dollars less?
3. Investigate Residual Income Streams
If you want to supercharge your savings, finding ways to automate your income can help you reach your goals. If you maintain a blog, investigate affiliate marketing, and banner ad opportunities. Do you have a spare bedroom or a guest house? Consider renting it out on sites like Airbnb. Perhaps you’ve always dreamed of designing an online course or writing an e-book — make this year the one you finish it!
4. Learn to Invest
Many people shy away from investing, but if you follow their lead, you’re missing a valuable opportunity to grow your savings at the pace of inflation. Even high-yield savings accounts average only 3% returns — but the stock market averages far higher returns over time.
If you’re not ready to investigate which stocks to buy, consider opening a mutual fund account. These accounts diversify your portfolio for you. You can even select funds that support the same causes as you do.
5. Take Advantage of New Tax Regulations
Due to changes in the tax law, you can now sock away considerably more cash for retirement without taking a tax hit. Indeed, maximizing your savings can result in tax benefits. If you have a financial advisor, sit down and review your strategy. If you typically manage your money and taxes yourself, invest in quality preparation software that doubles as a planning service. Such programs can help you determine how much you can put away while taking advantage of deductions and credits.
Achieving Financial Goals for Your Retirement
You can obtain a comfortable retirement if you start early and plan wisely. Employ these strategies so that when the time comes, you can hang up your hat with no worries.
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