If you’ve heard it once, you’ve heard it a thousand times… you need to plan for retirement. 401(k), Roth IRA, 403(b), there are so many intricacies… it’s complex and daunting, so what do we do? We brush it off, telling ourselves that it won’t impact us anytime soon and that we’ll think about it another day. The problem with that mentality is that the longer you wait, the harder it will be on you financially. Not only that, but it could potentially delay your dreams of retirement. I don’t know about you, but I don’t want to be working in my 70’s and beyond, which for the record, as of 2017, over 19% of Americans are. 19%!
I read an eye opening story during a financial planning course about two individuals who invested at different points in their lives. The first fictional character invested roughly $15,000 by the time he was 26 years old. The second fictional character didn’t start investing until he was 27 and ended up putting about $75,000 in investments between then and retirement. Guess who ended up with more? The first; although he invested less, he started early. This alloted time for compound interest to accrue and his $15,000 turned into about $2.3 million by retirement age! Seeing as I was already in my 30’s when I came across this story, when I read it, I could only think of 2 things: first was how depressing this was since I missed the boat, and secondly, how much I wish someone could have explained this to me when I was a teenager.
No matter if you’re in your early 20’s or in your 50’s though, now is the time to start building your wealth. The fastest way to do this is to decrease your expenses. I can’t emphasize this point enough; in order to instantly give yourself the feeling of a pay raise, you need to make sacrifices and live below your means so that you can take that money and invest it in pre-tax retirement plans.
“Live like no one else so that you can live like no one else.” – Dave Ramsey
Do you pay for cable? Cut the cord and use an antenna. Invest in one streaming service such as Netflix and call it good enough. Is your cell phone bill outrageous? If you’re not stuck in a contract, consider dropping your carrier and using a web-based phone service at home such as Ooma along with a pay-as-you-go cell phone for away-from-home emergencies.
These are just a couple of examples of things that you can save money on. To really delve more into your own finances though, you need to make a plan, create a budget, and stick to it. Comb through your finances to see what you’re spending your money on and where you can save. Need help with this? Consider using a free service that safely looks through your accounts and finds this information for you, such as Trim. It’s a great place to start, and you can immediately take the money that you save and start investing it!
How are you planning for retirement? Drop a note in the comments section below; we’d love to hear from you!
