No matter what age you are, money is important. But in today’s market, it can be harder than ever to feel financially secure.
If you struggle to save money and feel financially successful, you are not alone. Only 44% of people have tried to figure out how much to save for retirement. But it’s not impossible; you just need a plan. Before you start saving for retirement, build a small emergency fund. Then follow these four crucial steps to help you live comfortably when you’re older.
As you probably remember from your high school personal finance class, the earlier you start saving, the better. As you can see above, Mary started saving 10 years earlier than Bill and ended up with more than $100,000 in her savings at retirement age than Bill. Interest compounds and the longer your money sits in an account, the more returns you’ll accrue. That doesn’t mean that you are out of luck if you start saving later, it just means you will have to save more money each month to catch up to your goal.
The years before you retire are when your savings will be the highest and when they’ll be earning you the most interest. This is also an important factor because you will be potentially have the highest income and be able to save the most each month. Knowing how many more months of savings deposits you will make will help determine your final balance.
Today, this is one of the hardest factors. Many Americans have little to no disposable income after regular personal expenses such as rent and bills. Knowing how much you can budget each month to save will be important for your savings plan. Take into consideration that as your career moves forward, your earning potential will too and you should increase your monthly saving accordingly. As you can see below, the more you save each month, the more exponentially your portfolio will grow.
What you choose to do with your savings can be a matter of success or failure. Meeting with a financial advisor will provide the best overview for all of your options, including the level of risk each option has. The safest savings account with the greatest potential of returns is a 401(k). If your company offers a 401(k) retirement savings plan that you are not currently enrolled in, get information about it as soon as possible. Many companies offer a 401(k) where they match up to a certain percentage of your contributions (around 4.1% is the average).
Here are a few tools that will help you start planning your future finances: