Saving for the Future (Not Just Retirement)Dr. Jim Collins
Most people associate saving money for the future purely for retirement, but this can be a mistake because a lot can happen (and probably will) between one’s working years and retirement. People may lose their jobs, get raises and bonuses, or become unable to work. While finally reaching and enjoying retirement may be the ultimate goal, saving now for either tomorrow or 30 years from now is crucial.
It’s Never Too Late
Wouldn’t it be wonderful if everyone started saving for their future the day they received their first paycheck? For most people, saving for the future may begin in their mid-to late 30s, 40 and 50s. Sometimes a late start is inevitable due to college tuition, weddings, and unforeseen expenses. Nevertheless, it’s never too late to start saving and hopefully catching up for the future.
It Takes a Plan
The first step in successfully putting money away for the future is to develop a plan today. This can be as easy as creating and sticking to a budget, reviewing all expenses, understanding your household’s cash flow and determining how much you might need in the future.
Some people find it easier to save money when they have funds automatically deducted from their pay. They distinguish between their needs and their wants. Others set a little aside for an occasional splurge. Either way, saving money should be done intentionally while setting honest and attainable goals. Here are some steps to help.
1. Record Your Expenses
This can be a real eye-opener. It involves tracking all expenses related to the household, car, groceries, and outside activities like dining and entertainment. Expenses like these add up quickly. To be accurate, use credit card and bank statements. This can provide a clear picture of household cash as well as spending habits.
2. Look for Ways to Cut Expenses
When expenses are so high that they make saving for the future difficult, it’s time to start slashing nonessentials like dining out frequently and other forms of entertainment. Some areas to save money include energy and utilities, food and groceries, taxes, auto expenses and banking and credit card fees. Excessive spending now can mean a lot less financial security in the future and there are big differences between wants and needs.
3. Set Your Savings Goals
Since everyone has a different idea concerning how much money they’d like to save, it’s best to sit down and plan it out and make sure to involve your spouse or life partner. Include items in the future like weddings, vacations, emergencies and retirement. Then, calculate how much money that will take and how long it should sit in savings or investments. Some experts believe in saving 10-15% of annual income and in automating savings from paycheck to savings accounts. And, if your employee offers a retirement savings plan, contribute to it or open your own Roth IRA.
4. Work with Experts
Most people don’t have the time to become financial wizards. Luckily there are good financial planners and wealth managers who can help. Do your due diligence before hiring anyone to manage your money. Talk to family, friends and colleagues for their advice. Financial goals change, so it’s important to meet every few months to make sure your plan is still relevant. A financial planner should also provide reports on growth so that you can watch your investments flourish.
5. Don’t Forget to Enjoy Your Life!
Don’t become so obsessed with saving for the future or your retirement that you miss living your best life now! It would be a shame to save so much money and then poor health or tragedy strikes and you can’t live on what you’ve saved. It’s very possible to have some discipline and resist instant and impulsive gratification while enjoying life, relaxing, celebrating and occasionally splurging.
Saving After 50 (Catching Up)
This all sounds good, but what if you don’t start saving until you’re in your late 40s or early 50s? Then what? It’s time to catch up and it’s never too late to develop a solid financial plan that is aligned with your goals. You can start by refining your budget and eliminating excessive spending. You can also:
- Pay down debt
- Invest more aggressively
- Max out all contributions
- Plan for emergencies
- Downsize your lifestyle
- Get a part-time job
- Work as long as possible
Most people have some idea about saving for the future, retiring, and living after employment. But things may change. Working a little longer allows your savings and investments to continue growing without touching them. It also reduces the number of years you’ll depend on it. You can also delay taking Social Security payments which will increase your monthly benefit significantly.
Final Thoughts on Saving for the Future
It has been said that life happens in between the plans we make. While this is true and probably a good thing, we can still have a solid plan to build financial security for the future as well as a happy and healthy retirement. It only takes a few steps and a fair amount of time.