Saving for retirement can seem like a daunting task. You need more than just the money: It is also about knowing how much you will need as income after leaving the workforce. Thankfully, there are simple rules for wealth financial planning that can help you estimate how much you will need to save each month.
These can be used to help ensure that your nest egg will be ready when you retire. Used wisely, they can also help you make the right decisions for building a legacy of generational prosperity.
Please explore the following with us:
- Increasing Your Income
- Reducing and Eliminating Debt
- Investing Wisely
- Working with a Financial Advisor
Focus on the Big Picture
If you want to build a million-dollar retirement plan, there are key things you need to know, such as how much your expenses will be in retirement. It is also important to determine what kind of return you can expect from your investments over time.
Ultimately, how much you will need to save will depend on how much you plan to spend. As a result, your lifestyle expenses are often the biggest factor in determining the size of your retirement fund. Once you have all of this information, it is time to start building a plan.
You may want to use an online calculator like this one. Next, consider all of your options and then estimate how long it will take for your savings account to grow into your goal. The more you expect to spend on housing, transportation, food, entertainment, and so on, the larger your nest egg will need to be.
Try to keep realistic about what kind of lifestyle you will want once you retire—and how much it is likely to cost. Be sure to take into account inflation rates and unexpected events (like losing your job or needing unanticipated medical care). If you do not feel confident in your ability to do this on your own, professional financial planning is available.
Increasing Your Income
If you want to retire early, your savings goals will probably have to become more aggressive. The freedom to leave the workforce at a younger age often requires both saving more and spending less of your current salary. However, this does not have to mean spending less on fun things now.
Believe it or not, you can still enjoy yourself while saving for retirement. It is mainly a matter of coming up with a plan for how you will spend your money and choosing investments that allow you to maximize its growth potential over time.
Reducing and Eliminating Debt
In William Shakespeare’s “Hamlet,” the character Polonius counsels his son to “Neither a borrower nor lender be.” This is because borrowing keeps you in debt, reducing your income—and, as a result, your ability to save money for yourself or your loved ones. In fact, buy-now-pay-later credit cards normally cost significantly more money to pay off than you initially needed them for.
Certainly, there are instances in which someone simply has no other option, such as when a car breaks down, and you do not have enough in the bank to cover the repairs. Even then, you are better off asking to pay the garage in installments, if you can: Credit card companies make their profits from charging the highest annual percentage rate (APR) they can.
Worse yet, some people only pay their minimum due each month. While this can make things easier when money is tight around the house, it also lengthens the amount of time that you take to pay off your debt. That is precisely what they want—because the longer you take, the more interest payments you have to make overall. In other words, they make much more money off their loan to you when you pay it off slowly.
If, like many people, you lack the funds to pay off a credit card debt(s) altogether, you might want to look into a debt consolidation program. This facilitates taking all of your debts and grouping (or “consolidating”) them into one monthly payment. The advantage of doing this lies in the fact that it generally includes a lower interest rate than you have been paying.
Maximize Your Employer’s Contribution Matching
Many companies offer a contribution-matching program for employees’ 401(k) individual retirement accounts (IRAs). This is always worth capitalizing on when you have the opportunity because it is free money toward your retirement goal. If you are not sure if your workplace does this, it is well worth finding out.
If your employer does offer matching contributions, take full advantage of them: Divert as much of your monthly salary as you can toward those payments for as long as possible. Whatever you put in will be doubled, so (as long as you avoid running so lean that you struggle to keep the bills paid), there really is no downside to this.
Decrease Your Expenses and Find Extra Money
Being willing to make sacrifices today can also help you have more money available down the road. Again, I am not talking about starving yourself or anyone else. I am pointing out the fact that simply cutting back on how often you eat fast food (or splurge shop for things you do not need) can make a difference.
Some people have saved monthly professional salon costs by purchasing a $20 pair of clippers and providing their own haircuts in front of a mirror. That may not be advisable for everyone, but the idea is to examine your own situation and determine what is necessary vs. what you, personally, could live comfortably without.
There is an art to investing that can turn a profit. Even the most experienced investors cannot foresee the future—and as a result, they sometimes take losses—but there are certain indicators that they have learned to look for. These do not provide any guarantees, but like the smell of inbound rain, they can offer insight as to what is likely to happen over time.
Another hallmark of more successful investors is self-control. This can be challenging to master since money is an inherently emotional subject. Nevertheless, many people buy in on one asset or panic-sell another when a reasoned, strategic approach to portfolio management could have spared them from resulting losses.
Few people climb the ladder to becoming a millionaire without some desire to leave a financial legacy for their loved ones when they pass away. Unfortunately, having money to leave behind does not promise that your estate will be administered efficiently (or even in keeping with your wishes).
Effective estate planning begins with a will to keep your savings and assets out of probate. However, you may also want a trust to cover, for example, providing for a minor child’s upbringing and education.
Working With a Financial Advisor
There are more nuances to completing all of these steps than I have space to go into here. This, among other reasons, is why I believe your best results are more likely when you work with a certified financial planner. Wealth management should not be something keeping you perplexed and frustrated.
Scott Marsh Financial’s extensive experience is at your service. We can help you—not just create a plan but—walk alongside you, acting as a guide to help you navigate your saving and investing journey. Contact us today to learn why we might be the best financial advisors in Utah.