With the economy in the state it’s in, it is hard for many American’s to think about retirement before it becomes a reality and by then it may be too late. Too many Americans have to work long into their later years because they did not plan ahead for retirement. It may be difficult on a limited budget, but you have to put what you can into smart savings while you are young to plan for your future. If you take the time to sit down and make a plan, you will be thanking yourself when it’s time to retire and you can live comfortably on what you started saving years before!
I know what your thinking…its great to say; “Ok, I would love to plan ahead, but I don’t have enough income to put any extra money away.” Well here are some ways to cut down on your budget without feeling it too much in your everyday life.
1. Don’t spend raises
It can be very exciting to finally get the raise you have been waiting for and wanting, but the best way to set up your future is to keep living on the budget you had before the raise and to put the extra income into a savings or investment account. This way you won’t feel any difference in your daily life and you can save more than you have been able to before.
2. Save your tax refund and any other windfall money you come across
When tax season rolls around we all think “Shopping Spree!” and as much fun as it is to go out and spend this new money, the best option is to save it in a savings or investment account. The same goes for any other money you come across, that you did not plan on getting. These small investments add up over time and make it easier to save for retirement.
3. Avoid Penalties
Try not to take any money out of retirement accounts too early. Many of these accounts have penalties for taking the money out before you get to retirement age.
4. Set a budget and stick to it
Sitting down to see how much money you have coming in and going out every month is very important. This will help you see how much you should be spending from each paycheck as well as how much you can afford to put away from each paycheck. Sticking to a budget and not over spending will also help you stay out of debt!
5. Pay off and/or settle any debt
Part of the plan in your new budget should be to eliminate any debt you already have. This way your income can come in and go toward savings and retirement rather than going straight back out to debtors. Set up a payment plan for yourself so you can eliminate debt in good standing and negotiate a settlement amount to pay off either in one payment or on a payment plan for debt that is in collections.
6. Invest into retirement accounts early
As soon as you can, make sure to take advantage of retirement accounts such as a 401K. This allows you to put money into an account pre-tax and it will collect interest over time to set you up for your financial future.