Do you feel like your retirement plans have gotten off track? You’re not alone. A recent Gallup survey showed that 64 percent of Americans are concerned about not having enough money for their retirement. In fact, retirement has been the top financial worry in all 16 years that Gallup has conducted the study.1
With the arrival of the new year, perhaps now is the time to make a resolution to get your retirement back on track. Resolutions about weight loss or quitting a bad habit are always popular, but a retirement planning resolution could lay the foundation for a lifetime of financial stability. Below are a few possible resolutions to consider:
Develop a budget.
Budgets are incredibly helpful tools. They help you understand your finances and allow you to make informed decisions about when and where you can spend your money. Despite budgets’ usefulness, however, two-thirds of Americans still don’t use one.2 Without a budget it can be difficult, if not impossible, to know whether you’re on track to meet your goals.
A budget should have line items for individual expenses. You may want to group similar expenses together. For instance, costs for property taxes, homeowners insurance, mortgages and home maintenance may all go under a “housing” category.
How you organize your budget is up to you. However, all expenses should be broken into two groups: mandatory and discretionary. Mandatory expenses are those that you have to pay. They include things like housing, food, insurance and debt repayment. Discretionary expenses are the ones with more flexibility. They often include the “fun” expenses, such as shopping, travel and dining out.
Be sure to include savings as a mandatory expense. It’s easy to make savings a low priority if you have other financial challenges. However, if you can get in the habit of paying yourself first, you’ll likely see your balance grow quickly.
Get your debt under control.
Debt is often a very necessary part of life. It can be used to fund major life purchases, like a home or an education. In some instances, like business ownership, it can even be leveraged to grow your wealth.
However, if you let your debt get out of control, you could find yourself unable to save as much as you want. It’s important not to confuse what you can borrow with what you should borrow. Also, be careful with credit card debt. High-cost, nondeductible consumer debt can significantly weigh down your ability to save. Every dollar that goes toward credit card interest is a dollar that can’t be used for retirement savings.
If you find yourself with a lot of credit card debt, you may want to try to consolidate it into a low-interest vehicle. You could also call your credit card companies and request a lower rate. By slashing your interest rate, you can potentially pay down the debt faster.
Plan for life’s emergencies.
Often it may feel like the only predictable aspect of life is unpredictability. Things happen, and sometimes those things can be very expensive. You may need costly medical treatment, or your home may need an expensive repair.
While you can’t predict when or what emergencies will arise, you can prepare for the unexpected. One way to protect yourself from unforeseen financial emergencies is to create an emergency fund. Build a substantial reserve in a liquid, low-risk vehicle so you don’t have to pull funds from retirement accounts to pay for emergencies.
You could also consider reviewing your insurance coverage to see if there are any gaps that need to be filled. Life, disability and even long-term care insurance can protect you and your family. By having that protection in place, you can preserve your retirement assets and your ability to save, even if you suffer one of life’s biggest possible emergencies.
Searching for a retirement planning strategy to fit your goals? Let’s start a conversation. Give us a call at TB Financial and discuss your goals with a financial planning professional today.
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