If boosting your retirement savings is on your to-do list, you're not alone. The Federal Reserve's 2022 Report on the Economic Well-Being of U.S. Households found that 28% of non-retirees do not have any retirement savings, and of those that do have at least some retirement savings, 69% do not view their retirement savings plan as on track. Regardless of where you stand in your retirement planning, starting to save sooner rather than later is key. Every dollar saved counts, and these tips will help you find more dollars to save.
Set a Savings Target
Setting a target savings amount can be a motivating goal. For example, you can try to save $500 a month ($6,000 per year), or even $1,000 a month ($12,000 per year). Either of those may seem intimidating, but breaking it down into manageable steps will make it seem more achievable.
For example, if you try to save $6,000 per year, you could try to save a weekly amount of about $115. If you try to save $12,000 per year, you could try to save $230 per week. Breaking it down further would be $16.44 and $32.88 respectively. Once you break it down into an amount that you see as achievable, it will be easier to manage and actually achieve.
Automate Your Savings
At times, the initial hurdle is simply setting aside your funds. Once you've determined your savings target amount you can set up automated savings. Whether it's setting up automatic contributions to your 401(k), automatic contributions to an IRA or Roth IRA, or scheduling transfers to a savings account, automating ensures your money is earmarked for savings before any temptations to spend arise.
Create a Spending Plan (aka Budget)
Budgeting might not be the most thrilling activity, and many folks tend to steer clear of it. However, it's a crucial step in knowing the flow of your finances — where your money is coming from and where it's going each month. This understanding is vital to determine how much you can allocate to your retirement fund. Having a spending plan will allow you to pinpoint the amount you can save towards your retirement savings target.
Cut Back on Your Spending
If you find yourself falling short of the goal, a budget helps identify areas where you may be spending more than you realize and discover ways to reduce your spending. Trimming your expenses is understandably not the most appealing task. Let's be real, if you buy a Starbucks coffee once in a while, skipping that occasional Starbucks coffee won't make or break your retirement. However, if you're buying a $5 coffee every day, that amounts to $1,825 per year. If you have been buying a Starbucks every day, could you reduce it to a couple times a week to save over $1,000 per year?
There are strategic measures (like getting Starbucks less often) that you can adopt that could make significant impact on your retirement savings. Start by scrutinizing your subscriptions and axing the ones you don't actively use, or rotate around them as you binge watch different shows on one service at a time. Perhaps you're subscribed to multiple streaming services but only really use one, and don't need the others at all. Cancelling the extras may not even register as a sacrifice, yet redirecting those funds to your retirement savings through automation can make a big difference.
There are multiple ways to cut back on spending. You could review your auto and homeowners insurance policies to look for savings opportunities, and seek advice from a tax professional to optimize your tax situation in a way that benefits your retirement savings.
Increase Your Income
The flip side of the savings equation involves boosting your income to save more for retirement. If a raise is on the horizon at your current job, don't hesitate to request it. If you consistently find yourself underpaid, it might be worth exploring other job opportunities. Leverage your valuable skills by considering side ventures like consulting. Get creative — declutter your home and convert the proceeds from a yard sale into contributions for your retirement fund. Make sure you're taking advantage of your employer's 401(k) match, as that's additional income that you can add to your retirement savings.
Combining these approaches could propel you closer to your savings targets. If challenges persist, remember that any amount saved for retirement is a step in the right direction. And if navigating retirement planning feels overwhelming, seeking guidance from a financial advisor can be invaluable in crafting a personalized financial plan for your unique situation and financial goals. Escient Financial is here to help you retire the way you want to and achieve all your other goals. Go ahead and...
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