Twenty percent of Americans aren’t saving any of their yearly income. This is according to a survey conducted by Bankrate.com. The same survey also indicates that only a mere 16% of people who answered put away 15% or more in savings, which is the percentage experts recommend.
So, even with a rosy economy at the moment, what is preventing Americans from stashing away some of their earnings? Some 39% attributed it to higher living expenses, while 16% blame their low income. But what will happen when retirement comes flying through your front door, and you longer have that enjoyable paycheck at the end of the month?
These statistics paint a worrying trend because a possible financial pitfall looms after retirement. However, saving for your sunset years isn’t that difficult. Here are some of the ways you can take charge of your finances and plan for retirement.
Cut down on spending
This is no easy task, but it is the best way to sit in the driver’s seat when it comes to your personal finances. A study done by Hloom revealed that a whopping 8 out of 10 people admitted to wasting their money. This means that the notion of ‘low income’ doesn’t quite exist.
What you need to do is analyze your monthly expenditures and root out unnecessary expenses. That includes changing your view on spending. Instead of driving to a nearby store, take a walk or cycle here. This simple change in your way of living is helpful in beginning a saving lifestyle that will go a long way in emancipating you from the chains of financial slavery.
In addition, begin the habit of always preparing a budget. It will help you spot unnecessary expenses thereby helping you save.
Find a side hustle
Side hustles aren’t as bad as they sound and neither are they are demeaning, not in any way. In fact, many people have quit their 9 to 5 jobs to concentrate on what was once their side hustles. There are many jobs you can do on the side.
Freelancing is one such job. If you are a web developer, you can register with a freelancing platform such as Upwork to sell your services. You’ll be surprised to find out that it’s possible to make more money than on your day job. Others alternative gig jobs include:
- Starting a side business either online or offline
- Driving an Uber taxi for a few hours after your job
In short, transform your passion into a money-making machine. As an encouragement, the next time you have second thoughts on starting a side job, remember that 44 million Americans work side jobs.
Keep an eye on your debts
Debts or loans, whichever way you want to look at it, are a major hindrance to saving toward your retirement. It could be mortgaged, student loans, auto loans or credit cards. By keeping these loans at bay, you move a step closer to financial freedom.
You can negotiate for new and favorable interest rates with your lender if you have a good credit score. With the new rates at just right loans, you’ll be able to pay off your loans faster so that you can focus on saving for retirement.
Take advantage of employee benefits
Employers send a certain percentage of your earnings to your retirement plan. However, estimates are that only 1 in 3 Americans takes advantage of 401 (k) s and other retirement plans. If you are among that statistic, start saving soon and follow up to make sure that your company does the same for you.
There are other ways you can use to get your employer to save money for you. One is a Health Savings Account which exempts your medical savings from taxes. This means that you can save the money that would have otherwise ended up as taxes.
Save for yourself
That seems quite awkward, especially if you are in someone else’s employment. Unfortunately, or fortunately, many people fall under the umbrella of employment. No worries, though, if you are self-employed because compound interest is your savior.
The beauty of compound interest is that your money grows a certain percentage per year. This means that the earlier you start saving, the better. So, take advantage of the time you have between now and your planned retirement age.
Start by opening an IRA (Individual Retirement Account), where you can deposit a maximum of $5,500 per year if you are below the age of 50 and $6,500 if you are over 50.
Start adopting a savings lifestyle
This goes out to all the young people out there. Getting your first job deserves celebrations, but you need to start saving from the word go. Starting to save early in life brings numerous benefits later in life, such as overcoming debt.
In addition, this habit soon develops into a lifestyle where you save even when negotiating with financial institutions or products.
Saving for retirement is hard but saving on a tight budget is even harder. While it may be difficult to do so, it is important to look at the bigger picture. Your focus should always be on adopting a savings lifestyle that will keep multiple problems at bay, including retirement headaches.
Remember that your employment status will come to an end, and you will not be able to sustain your lifestyle once the paycheck dries out. So, avoid these headaches by implementing the above tips today.