For many, the summertime means having a looser schedule and “longer days” with more daylight to get things accomplished. It’s a symbol of freedom; no school for kids, a popular vacation time, maybe even more casual attire at work. I’d venture to guess, it’s also the time of the year where people think about retirement more often. How soon can I be on a permanent vacation? Most would say, not soon enough!
So, if you’ve got retirement on the mind, but know you have many years still to go, that’s ok. Here are 5 things to do, financially, before you turn 50 years old (make your goal timebound!) that will help increase your likelihood of making retirement a reality, sooner.
- Automate your life and expenses. Our best advice is also our most basic advice. Spend less than you make and save the difference. The easiest way to do that? Automate, automate, automate. Force your savings and automate a tool like QuickBooks to track your spending. It takes a couple extra hours each quarter to manage this tool so that rather than wonder where your money went, you start to tell it where to go.
- Max out your retirement account. Make this a goal. You certainly don’t want to leave “free money” on the table if your employer matches your contributions. But take it one step further. Commit to increasing your contributions every year. The easiest way to get there is ignore the pay increases you’re granted and increase your savings instead.
- Open a brokerage account to save outside of your retirement account. Automate the savings here, just like the retirement account. After making sure you have an adequate cash reserve (we say no less than 6-months for your household expenses) and saving enough to get your company match on retirement savings, save here. This account will give you access to money for a rainy day or another opportunity (although try not to touch), it does not have premature withdrawal penalties like a retirement account might and allows you to seek greater returns than cash.
- Pay down the debt, faster. Compounding interest is an amazing long-term benefit of savings. On the flip-side, compounding debt interest has the potential to cripple you. Commit to making extra payments when possible. Automate this too so you can try to be debt free earlier and free up cash flow. For example, round up your payments. Paying an extra $250/month on a 30-year $350,000 mortgage payment cuts 6.67 years and $68,000 worth of interest!
- Think beyond taking student loans for your kids. If you haven’t been able to aggressively save for them yet, don’t cripple your own finances right before considering retirement. Perhaps it’s better for your kids to take ownership over their education expenses and understand the long-term effects of their school choice and expense? Maybe instead of their education being a gift you pay handsomely for, you can decide to help them pay that debt later in life, if they graduate, if you’re in position to do so, and if you want to at that time.
There’s no perfect formula to making retirement a reality. But set some aggressive goals for yourself now and break them down into the smaller steps that can be taken, each and every year, to make the goal more feasible in the long-run. These five steps would greatly increase the likelihood of getting on a summer schedule, permanently, sooner!
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