Imagine for a second that you can retire in your 40’s. Imagine, again, you can retire rich with enough money to enjoy some of the finer things in life, like traveling the world, spending quality time with your grand-kids, taking long walks on the beach. Or vacationing in Hawaii. Who wouldn’t want that?
Thinking about this comfortable retirement is one thing, but saving and planning for it is quite another. It’s not that easy. However, there are money savings strategies that you can implement today to make this dream a reality.
For example, saving early and as much as you can through a tax-deferred retirement account can help you reach your goals faster. Here are a few tips to get you started.
If you want to maximize your retirement savings and need an extra hand, a financial advisor can help. Try SmartAsset’s free matching tool to find an advisor in your area in 5 minutes.
1. Get a side hustle.
Beyond your traditional 9-to-5 job, you can increase your income – and put extra cash towards your retirement savings – by getting a side gig, a part time job, completing surveys on your free time, or starting a blog.
Indeed, with the uncertainty of the job market, it’s important to have more than one stream of income.
2. Hire a financial advisor.
You don’t need a financial advisor for every aspect of your financial life. However, there are times when seeking professional financial advice is extremely important. And retirement planning is one of them.
While hiring a financial advisor will not guarantee you that you will retire rich, it will certainly increase your chances. A financial advisor can create a realistic and comprehensive plan for you.
They can outline for you the advantages and disadvantages of different strategies, including downsizing to a smaller property, increasing 401k contributions, or refinancing your mortgage, etc…
Use the Investment Adviser Public disclosure website to find out where a financial advisor has worked, their qualifications, education, training.
Furthermore, and most importantly, find out whether they have advised people with their retirement issues in the past. It’s important to get the right advice to achieve your retirement goals.
So, don’t be afraid to ask about their expertise in retirement planning. If they don’t have enough experience or knowledge in retirement planning, find another advisor. If you don’t already have a financial advisor, you can find one by using SmartAsset free tool.
Looking for more tips? Read: How To Choose A Financial Advisor?
3. Move to a state with a lower cost of living
Beyond hiring a financial advisor to help you with your saving goals, you should consider buying a home in a city with a lower cost of living. You can sock away a lot more money just by doing that.
For example, New York City or San Francisco are cities where you’re most likely going to live paycheck to paycheck, but Dallas, Texas or Omaha, Nebraska may not be.
4. Save as much as possible
As Ken Hevert, senior vice president at Fidelity, says “it’s important to focus on 3 main things during your working years: the amount you save, the accounts you save in, and your asset mix.” Of the 3, the first is the most important, as no account or asset mix can make up for not saving enough.”
If you’re busy and cannot do it yourself, then try Digit. Digit, one of the best apps for saving money, finds extra money in your budget and save that money for you automatically.
5. Start investing early
In order to retire rich, you need to start investing early. Doing that can pay off big for you in your golden years. Thanks to the power of compounding interest, the earlier you start investing, the more money you’ll be able to accumulate in your savings account.
Whereas if you wait until later to invest, you will likely accumulate way less even if you’re able to contribute a decent sum every month.
For instance, if saving 10 percent per year in your early 20s gets you to your retirement goal, waiting until your 30s to start may mean putting away 20 percent to reach that same goal. So the longer you wait to save, the more money you will need to save.
If you’re starting out and don’t have that much to invest, try your hands with this App called “Acorns.” Acorns allows you to invest your spare change. It rounds up your spending to the nearest dollar every time you make a credit card purchase and invest the difference in index fund and ETFs. While it’s not going to make you retire rich, it’s a great way to start if you are a beginner.
6. Don’t keep up with the Joneses
One of the things that can eat up your savings is trying to keep up with your friends and neighbors. You will less likely retire rich keeping up with the Joneses.
Just because your neighbor just bought a new car, does not mean you should do it too. You may have not the same goals as your neighbors. Your financial situation may be different.
7. Contribute to a 401k
If your employer offers a 401k plan, try to contribute the maximum amount allowed by law. You can save up to $19,000 per year (for tax year of 2019.) If you’re 50 years or older you can contribute an additional $6000.
Participating in a 401k plan, is one of the easiest and fastest ways to boost your retirement savings, because you don’t pay taxes on the earnings you generate until after your reach 65 years old. So money in a 401k is growing tax free.
8. Take advantage of your employer 401k match
Another benefit of contributing to a 401k plan is the fact that your employer may also match your contribution. That means that an employer may add 50 cents or a dollar for every dollar you as an employee contribute.
So even if you cannot contribute the maximum amount, any sum you can contribute will get you a step closer to your goals. The most important thing to remember is to participate no matter how much money you can afford to contribute.
Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.
9. Reduce your spending
To boost your savings, you need to reduce your spending. To reduce your spending, figure out where your money goes each day or each month.
Check your banking statements, credit card bills/statements, or any documents that show your spending history.
After you have this information, see what are some of the unnecessary things you can leave without or reduce. Perhaps, you don’t need Cable TV or magazine subscription. Or perhaps you can dine out less often.
10. Earn more money
Earning more money can boost your savings account as well. Perhaps you can get a higher paying job or work overtime. However, making more money doesn’t mean anything if you spend more than you earn.
11. Open an IRA account
If your employer does not offer a 401k plan or if you have exhausted contributing to your employer’s 401k plan, you can still contribute to an IRA (either a Roth IRA or a traditional IRA).
As with money in a 401k plan, money in an IRA compounds tax free until you withdraw the money. The only difference however, with a Roth IRA you pay tax upfront. See this article for more.
So if you earn an income (or receive alimony), you can contribute up to $6000 (the annual contribution limit for 2019), or $7000 if you’re 50 years old or older.
12. Save automatically
One of the easiest ways to make saving a regular habit is to make automatic contributions. This way you don’t forget; you just ‘set it and forget it.’ So automate your savings can help you stay disciplined.
13. Save your bonus or tax refund
If you receive a bonus this year or tax refund, resist the temptation to spend all of it. Instead, put some of that money towards your retirement account.
14. Diversify your investments
Putting all of your investments in one basket, then you risk losing everything in case of a stock market down. Rather spread your investments across several asset classes, which will not only save you from losing everything, but also increase your long term returns.
If investing is intimidating to you, you should work with a financial advisor to help you build a diversified investment strategy.
If you’re looking to retire rich, then read the following articles:
Save more money with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your saving goals Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.