Pay Yourself First
Consider yourself an expense; just like you pay your bills, saving for retirement needs to be included in your budget. The easiest way to pay yourself is by setting up an automatic transfer from your paycheck into your 401(k) or other retirement savings account.
I recommend contributing 10-15% of every paycheck. If you can’t save that much, be sure you are saving at least enough to earn your employer’s match. You can also set up automatic contribution increases of 1-2% every six months, once a year or with each raise.
Spend Less Than You Earn
We often need to go back to the basics when thinking about our finances; if you can’t afford it, don’t buy it. Know the difference between a want and a need. Anytime you go to make a purchase, ask yourself: Is this a want or a need? If it’s a want, is what you’re paying for worth it? While the latest gadgets and accessories might seem enticing, we all have greater needs, such as healthy meals, a safe home and a quality education. If you have a big decision to make, financial or otherwise, think long and hard about the pros and cons. This could be as small as buying a new car or as large as launching a new business venture. This way of thinking helps take emotion out of your decision-making.
Prepare for the Unexpected
Emergencies are inevitable! Whether it’s a broken-down car, unexpected home repair or a medical emergency, you need to be financially prepared. I recommend everyone have an emergency fund with 3-6 months’ worth of expenses you can access at any time. Start your emergency fund setting up automatic monthly transfers from your checking or other spending accounts into a savings account. If you recently paid off a car loan or credit card debt, keep making those payments, but pay yourself by transferring the money into savings instead of sending it to the lender.
Plan for Your Future
35% of Americans admit to having nothing saved for retirement. Take time to sit down and figure out how much money you need to save for retirement. I have a calculator on my website, scottbraddockfinancial.com. If you’re unsure how to get started, find a trusted financial professional who can assess your current financial situation and help create a plan that works with your unique goals. I am a firm believer that if you’re going to make any big decision in life, you need a good coach. I help my clients take charge of their finances through 5 simple steps: discovery, analysis, mapping, execution and then monitoring your progress.
We all want to give our kids the very best. However, it’s important you put yourself and your financial future first because there are no loans for retirement. Almost half of parents and grandparents have given money to their adult children in the last year. It’s not just a couple hundred dollars either. They are giving between $1,000 to $2,000. Instead of giving your adult children money, consider being their financial mentor. You can help with budgeting, managing credit cards and preparing for job interviews.