One of the most important components of preparing for retirement is a consistent saving strategy. While the journey can be daunting at times, if you attack it in bite-size pieces, it is amazing how much can build over time. Here are a couple steps you can take in order of priority.
Don’t leave money on the table
Always at a minimum, contribute to your company’s retirement plan up to the employer match if it is offered. This is essentially “free money” and is too good of an offer to pass up on. You can think of it as getting 100% returns on your money on day 1.
Don’t steal from your future self
Be very careful with consumer debt especially if it is financing lifestyle purchases. Credit cards are some of the most expensive ways of borrowing money and if used inappropriately, essentially steal from your future in the form of interest payments. If you are going to use a credit card, try and make sure to pay off the balance every month. The points and cash back are never worth it if you keep a consistent balance.
Unfortunately, surprises always come up and no matter how well you plan, there always seems to be extra expenses along the way. Instead of relying on credit cards, it is important to build up a safety reserve of at least three months’ worth of living expenses. We recommend keeping this in a savings account and it doesn’t need to be invested, the most important thing is that it is available when you need it.
Save towards your goals
Once you have the above strategies dialed in, it is time to focus on your long-term goals. Maximizing how much you can contribute to your retirement savings plan is a significant opportunity to prepare for your retirement. Work with your advisor to find out how much you need to save at a minimum to make it towards your goals. If you are having trouble saving that much, use every raise as an opportunity to increase your savings rate towards your retirement plan.