When you envision your retirement, do you see yourself:
A.) Enjoying your free time pursuing new and old interests, such as traveling, learning piano or spending more time with your friends and family
B.) Working part-time while also collecting Social Security, to keep up with bills
C.) I don’t envision my retirement.
If you answered B or C, then it’s high time to start thinking about your future – whether it’s 10 or 40 years away. The most surprising thing about retirement planning is that it doesn’t have to be scary. Actually, it can even be quite fun – once you get the hang of it.
According to a recent poll by Bankrate, 23 percent of Americans said their biggest retirement fear was running out of savings.1 Don’t be one of these people! If you plan wisely, then you can enjoy a comfortable retirement.
A Latte A Day Keeps Savings at Bay
The first step is to figure out a budget.
Think of a budget as a steering wheel attached to all of your hard-earned money. If you don’t grab that wheel and take control, then your money will fly all over the place.
A good budget looks at your net monthly income and identifies three types of expenses:
- Fixed expenses: Monthly bills that don’t change – like your car payment, rent and electric bill
- Flexible expenses: These change – but are still necessary, like gas and food bills
- Discretionary expenses: This includes stuff you don’t need – like shoes, movie tickets and that daily latte.
FAST FACT: Before you scoff at the price of a latte, consider this: Millennials spend more on coffee than they do on retirement.
Women were worse than men when it came to coffee over-spending, according to a survey by Acorns. Forty four percent of women between ages 18 and 25 reported spending more on their daily coffee than on their retirement savings.2
The discretionary expenses are the ones you want to cut back on if you don’t have enough money to put into savings. It’s hard to imagine what you can eliminate, especially if you don’t go shopping regularly or splurge on Amazon.
But you might be amazed at how much the small, daily purchases add up. If a regular latte costs $5, over the course of a week, you’ve spent $35. In just one year, you’re looking at more than $1800 in coffee spending! Instead, why not invest in a coffee machine you love and a to-go container?
You’ll have saved over $1000 just by making that one adjustment.
And that’s just one daily purchase. You could probably cut back on other small things, too – like subscription services or gym memberships you don’t use.
A great tool in helping you get a clear picture of your spending is a Money Diary. We’re not suggesting you live like a monk, just keep an eye on what you’re buying – which is what this diary will help you do.
Whether you choose an app diary or an old-fashioned paper and pen, the main thing is to pick a tool that will work for you. If updating an app seems like a chore, then maybe a simple notebook is a better option.
In your diary, keep track of everything you spend – down to that cute little choker necklace or collectible toy. Whatever it is, it goes into the diary. After 30 days, you should have a pretty clear idea on where you can save.
Find a good life-savings balance. Maybe you can splurge on movie tickets, but skip the pricey popcorn. For jetsetters, wait for good airfare sales instead of buying during peak seasons.
After a few months of conscientious spending, it will become habit. When once you didn’t flinch at a $6 coffee drink, now you’ll think about all of the ways you can save that money or invest it for later.
1http://www.bankrate.com/finance/retirement/survey-americans-racked-by-retirement-fears.aspx
2https://401kspecialistmag.com/millennials-spend-more-on-coffee-than-401k-saving/
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