Step 1: Plan
Once you have chosen to secure your financial future, you must determine how you will accomplish this. Then, every day, you must decide to stand by your commitment. Allow this commitment to guide your daily life. Write down your specific goals of saving and spending. Include the actions you will (or won’t) take to achieve these goals. One goal prior to retirement could be to build income that will be present through retirement, for example, in real estate, a business venture, or other assets. Another goal could be to put a percentage of your paycheck away into a savings account. The most important part of planning for the future is sticking with your plan now.
Step 2: Live Below Your Means
When you consider how many millions of Americans are in debt, it’s not difficult to see the trend of people spending more than what can be financially sustained. Spending gets out of control and the accumulation of assets is nonexistent or rare. Then people end up not only in debt, but also unable to retire as soon and with as much money as they were hoping for. Wealth can’t be created by spending money; you must decide to live on less.
Consider every dollar you make as valuable to your ultimate goal. When you choose to spend a buck instead of investing it, you’ve thrown the dollar away, and now it can’t multiply to help secure your future. The more dollars you put away, the faster they will grow, and the greater your security will be. But the more you throw away… meager security is sure to follow. Millionaires typically don’t retain their status by accident; they are determined to secure their wealth.
Your debts should be reserved for the “needs” in your life. Credit cards usually have high interest rates and only fulfill desires of the moment. They are a waste of your valuable money. Reserve any debt you take on for things that will benefit you for the future, for example, real estate. The choices you make today will affect your wealth tomorrow. Make the tough decisions and soon your saving habits will become second nature.
Step 3: Learn from the Masters
Investing and accumulating wealth isn’t something that a person can innately know; they must learn how to profit. Choose to read investment material and take financial planning courses so that you may make the right decisions as opportunities present themselves. You also want to be able to start small and gain confidence in what you’re doing. Then, when a significant investment opportunity comes along, you’ll be able to make a sound decision.
Step 4: Start Early
The more time your money has to grow, the better off you will be. So now that you’re here reading this article, and thinking about retirement, it’s time to begin! The longer you put it off, the less money you will have for this crucial time. Or, you’ll need to dedicate even more money to your retirement every month. Money grows as time goes on, so decide to start growing it now. Don’t be intimidated, either. You have to start somewhere. Commitment to your retirement is the most important part of the process. With that commitment in mind, you can’t really mess up.
Step 5: Don’t Think About It
The greatest ways to save are the ways that you don’t even have to think about. These can include:
- Deductions from your paycheck: If you set up your paycheck so that a percentage of it is automatically deposited into a savings account that you do not withdraw from, you would be putting away money without even thinking about it.
- Owning your home: Instead of renting (in which you just give money away to pay for someone else’s place), consider owning for its financial rewards. Once your home is paid off, you can live without a mortgage or rent payment. Also, home values typically inflate over time.
- Rental property: This is a great option for those who are willing to take on the responsibility of being a landlord and the risk of potential financial headaches with less-than-perfect tenants. You will receive tax benefits, and depending on how you’ve priced the rent, positive cash flow every month.
- Tax deferred retirement plans: Like paycheck deductions, this would automatically be taken out of your paycheck. And, as an added benefit, many employers will match your investment (if it meets the qualifications), and it’s literally scoring free money. Plus, you may qualify for tax incentives.
Step 6: Own Your Investments
No one can make you wealthy except you—aside from those lucky lottery winners. Your habits and decisions will determine your future wealth or lack of. You even have to take ownership investments that don’t go as expected. Remember that hindsight is 20/20. Just try to take responsibility, learn from the blow, and move on.
Step 7: Design a Retirement Plan Appropriate for You
No one will have the exact same retirement plan. If you don’t want the responsibility that comes with rental property, don’t choose this path to help with your retirement. If you’re starting your retirement plan later in life, be realistic about your plan and how much money you will need to dedicate to your future. You will need a solid strategy, and a commitment to it. If you start your retirement plan in earlier years, don’t dedicate such a small amount to it, believing that you have plenty of time for saving. You’ll be forced to save an even greater amount as time goes on. Basically, have a plan that will work for you in your unique situation.
Step 8: Stay Away from Your Savings
If you’ve put away money for retirement, it can be tempting to reach for it when unexpected life events happen. Perhaps your car requires significant repair, or you lost your job… You need to remember that your retirement is not your cushion for expensive life happenings. You should be planning for emergencies separately from your retirement. To help force you to do this, a tax deferred retirement plan could be a great place to keep your retirement funds. They will hold penalties if you try to withdraw money from them, and that may just be enough incentive to keep you away.
Step 9: Prepare for the Inevitable with Estate Planning
You would probably be upset if you leave behind financial hardships for your loved ones to deal with. Their own grief should be enough… don’t leave them with more struggles. Plan and prepare your will and living trust, determine who your powers of attorney will be, get life insurance, and more. These things will be important to your loved ones, and they must know what you want before it’s too late. It is vital that you make it clear who is to receive what, and when they are to receive it. If you don’t have an estate plan, your state probably has one to implement… and it probably won’t follow the hopes you had in your head.
Step 10: Don’t be too Rigid
Frugality is an important part of life, but being so dedicated could lead you to missing out on the spice of life. Engage in your relationships, spend where it’s appropriate, and take care of yourself as to live a long and happy life. Retire because you have great, fulfilling plans for your future, and not because you simply want to avoid working. It is easier to drive towards a goal that excites you, rather than running from something that bores you. Enjoy your life in the moment, and plan for enjoyment in the future. Your life is happening now! Don’t wait for retirement to experience it.