Getting started saving for retirement. Whew. That is an important topic. Also, it is a topic that is on the minds of many adults. In fact about 25% of Americans have NO retirement savings. That is scary. Let me help with that. Let me help you in getting started saving for retirement. It is really important so that you can take care of yourself when you are old and you don’t have to rely on others to take care of you financially. Let’s get started.
(1) Make a Budget
Don’t start saving for retirement until you have done this step!
I know it doesn’t sound sexy but in order to get started saving for retirement you have to do this. Making a budget is like putting oil in your car. You may be able to get along without it for a while, but eventually it will come back to bite you. You NEED to put together a budget so that you can know where your money is going and how much extra you have or how much money you are short each month. This is really the basis for your personal finance journey.
If you don’t put together a budget EVERY MONTH you will have a really difficult time getting ahead financially in the long term.
Here is my guide on how I put together a budget every month. There are also several apps and free resources out there as well.
(2) Save an Emergency Fund
Don’t get started saving for retirement until you have this step completed either!
Although financial experts disagree on the amount of money that you need to save in an emergency fund, all reputable financial experts agree that saving some amount of money in an emergency fund is one of the most (if not the most) important steps in your personal financial journey.
Let’s be honest. In life, it’s not a matter of if you have an emergency, it’s a matter of when. At some point your car will break down. At some point your air conditioner or heater will give out. And at some point you will have an unexpected hospital bill. Life happens. Be prepared.
I suggest that you have a MINIMUM of $2,500 in your emergency fund before you start saving for retirement. However, you should work up to the point where you have at least 3 months of expenses saved in your emergency fund. If you don’t have at least 3 months of expenses saved in your emergency fund, don’t sweat it. Just keep saving something every month until you get there.
If you save at least $2,500 in your emergency fund you will be much better equipped with handling curve balls that life throws at you. If you don’t have an emergency fund and are actively saving for retirement and you have something unexpected happen to you, you will either put it on a credit card (BAD) or take it out of your retirement account (EVEN WORSE).
Oh and also, an emergency fund is NOT a credit card or a line of credit. An emergency fund is also NOT an investment. An emergency fund should be put into a simple savings account or money market account so that you can transfer it to your checking account if you have to.
(3) Get Your Employer Match
Actually getting started saving for retirement needs to start with this.This is a big one that I wish more people would take advantage of. Start saving for retirement by investing up to your employer match (if you have one). This is free money and you will not have a better return on investment on ANY investment than with your employer match.
You should not stop at your employer match, however. Simply getting your employer match is not enough to retire comfortably (or retire at all). But it is a great start! In fact, your employer match dollars will likely be your most productive investment dollars that you have in your retirement account. So make sure you get it!
Here is an article on how a retirement account employer match works.
(4) Save 20-25% of Your Income
This one might take some time to get to. But as you pay down debt, live on a budget, and get periodic raises, it will become easier.
Most people need to save somewhere between 20 and 25% of their income for retirement. People are living longer than ever. Social Security probably won’t be around or most of us when we retire and we should NOT count on it. And pensions are largely a thing of the past. We need to be aggressively saving.
When you get old, don’t depend on anyone to take care of you but YOU. Don’t put that burden on your kids or your grandkids. Do what you can to save now and work your way to the 20-25% threshold.
If you look at your budget and say, “There is no way I can save 25% of my income,” that is okay. Start with saving your employer match. After that add 1-2% per year until you get to th2 20-25% level. That is exactly what I have done.
When I first started saving for retirement I did not get an employer match at all. I started saving for retirement at 1% of my income and went up 1% each year from there. It might take some time, but make sure that you are heading in the right direction.
(5) Pay Yourself First
When you make a budget, put your savings at the top. This would include both savings into an emergency fund (if you don’t have at least three months of expenses already) AND retirement savings.
No one is going to pay you but YOU. Remember that.
You have to make it a priority.
It’s just like eating healthy or going to the gym. No one can eat healthy for you and no one can work out for you. YOU have to do it.
Final Thoughts
Getting started saving for retirement is one of the most important financial moves that you can make. And like most things in life, no one can do it for you. If you plan on hitting the lottery or getting a large inheritance from your long lost Aunt Gertrude, stop it. Those things won’t happen.
You have to take control of your financial future.
The best part about it is that you can!
You control your destiny.
Take control your choices.
You control you.
You can do it.
Let me know in the comments if there is anything that I can do for you. I’m here to help. 🙂
Until next time!
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