We’ve all made our fair share of money mistakes, but there is one money mistake that consistently shows up at the top of most people’s financial regret list: not saving enough money.
YOU CAN’T FINANCE YOUR RETIREMENT
Saving for your future should be one of your most important financial goals. You will want to be able to step back from the responsibilities of full-time work and build a life that has more leisure time in it. Some of us are even planning to reach that stage sooner rather than later. But the only way you can guarantee yourself a comfortable retirement is to begin saving early and save often.
Once you reach retirement age, there are very few options for lending. The only way to get ahead is to start your long-term saving early so you will have the financial resources that you need twenty, thirty, or forty years down the line. Social Security only covers so much; you still need your own nest egg to be comfortable in retirement.
START SAVING NOW
The longer you wait to start saving, the more money you will actually need to save in order to hit the same financial goal. If you invested $50 a month for 10 years, at the end of 10 years (assuming an average 8% rate of return), you would have about $9,000. But if you waited five years to start saving, you would have to save over $120 a month instead in order to have that same $9,000 at the end.
In other words, by putting off saving for five years, you have to more than double your how much you are saving if you want to end up with the same amount of money. There are many reasons people have for putting off savings, but the sooner you start, the better off you’ll be in the long run.
Saving for your retirement is probably going to be the most difficult financial goal you will face in your working life. Building up your nest egg early means you won’t have to work nearly as hard to catch up further down the line, even if your current income isn’t where you want it to be.
- Just start. Even if it’s $1 a week, set money aside and don’t touch it. Segregate it from your normal finances so you aren’t tempted to withdraw it and spend it. Let that money build. Leaving the money alone so it can pile up instead of reaching for it every time you hit a stumbling block is a huge step. Once you start saving, it is easier to continue saving because you will have already established a savings habit.
- Start small. Save what’s workable for your budget right now. Prove to yourself that you’re committed to saving, even if it doesn’t seem like a lot of money to you. This will still pay off in the long run compared to not saving at all. And remember that you can always increase your contributions as your income increases over the years. Just because you started out small doesn’t mean your contributions have to stay small.
- Have a one-year spending plan. With an entire year planned, you don’t have to make decisions every month about how much you are going to save. You can get a copy of our free 12-month budget template here.This kind of automation makes it easier to stay on track. It also helps you anticipate irregular expenses so you aren’t caught by surprise whenever they pop up throughout the year.
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