Your definition of financial success is based on your values. Values can change as you go through life. Reflect on your financial values and clearly define what you want in life. Start with what you can control, which is your saving and spending. Ignore things outside of your control. Too often we get distracted by what happened yesterday or what might happen tomorrow. Develop a plan to get there.
Assess what your retirement expenses will be in a typical month, look at your bank statements from the previous two years, add up the total spending and divide by 24. Do a six-month dry run on your projected retirement budget. This helps you get a feel for what spending will truly be like in retirement when you don’t have that regular paycheck coming in. It will be helpful if you’re carrying any high-interest debt and pay it down before you retire.
While you may not have the financial strain of an unexpected job loss, you could encounter large expenses, like an unplanned home repair or a hefty medical bill. Having a dedicated fund can help you cover unforeseen expenses rather than incurring credit card debt or dipping into your retirement assets. Get started as soon as you can afford to, and as you get older, take advantage of “catch-up” contributions.
Though you’re eligible to start taking Social Security retirement benefits when you turn 62, you’ll get a larger payment if you can afford to wait. Your monthly benefit grows by 5 percent to 8 percent annually for each year you wait until age 70, when you can claim your maximum benefit.
Pay yourself first by spending after you have saved. Spend mindfully based on your core values which transfers contributions into your financial growth rather than frivolous spending. Paying down debt will help you realize your financial goals. If you set up automatic transfers, it will help you increase your savings and your IRA; however, doing nothing can cost you.
