Wednesday, July 06, 2016
Saving Your Future
"Do not save what is left after spending, but spend what is left after saving."
- Warren Buffet
Similar to where you work, there are probably new people being hired, many of whom are young. I say young people only because I am getting older as opposed to others getting younger.
Enough about age though.
At my place of employment, we would impress upon each of them to sign up and start contributing to our company 401K retirement plan. Many did not want to hear our comments and advice.
It is understandable the reluctance on their part. They are just starting a new career, juggling student loans, furnishing a new apartment and buying a reliable car. They each have a potential 30 or 40-year career in front of them.
Retirement is the most remote thought in their head.
It is said by many financial experts that you will need nearly 70% of your income to maintain your standard of living after retirement. In addition to this, with improved health and medical advances, you could spend nearly one-third of your life in retirement as life expectancy grows.
So it is very important to start saving now - something - anything.
For me, advancing into middle or just beyond middle age began my work career near the tail end of a time when company pensions were still a major part of your retirement package. A vast majority of companies do not have pension programs and many remaining companies are opting out of pensions in favor of 401K programs.
This means I have a small cushion in having a small pension. Young workers today though do not have the luxury of a pension building in their early career years. And the troubling fact for these young workers is this will put them behind in saving for retirement if they do not start saving now.
Resist the temptation to delay saving for retirement.
Each month, pay yourself first. Start with something, any part of your take home and place it into savings. But be honest with yourself, you could do more then you think. Apply this to a retirement savings account. If your company offers a retirement plan with a contribution match, contribute enough in order to take advantage of the full company match.
How much should you be saving?
There is a common 10/10/80 rule which says contribute 10% to your church, charity, or something that is tax deductible, which helps others and then you during tax time. Then pay yourself by saving 10% before you pay anyone or anything else. Put this money into a 401K, IRA, CDs or someplace long term. Try to use pre-tax dollars if possible as it will lower your taxable income now and save you tax dollars.
The last part is the 80%, the hardest part for most everyone.
Live on 80% of your income and I am talking about your take home pay. Many people have a very difficult time with this because we are a heavily driven consumer society. TV commercials, print ads and billboards all shout at you to spend more money. Just remember that you alone are not responsible for keeping all of those companies in business. You do not have to purchase that new car, have the fanciest house or even the most fashionable clothes.
What you need is enough money for retirement.
Three more tips;
1. Have your money automatically deposited each month into your 401K or savings plan. Out of sight, out of mind, you will be surprised how you don't miss it as it builds with compounding interest.
2. Create an emergency savings fund at your bank, roughly six months of your household income. Include a little extra spending money into your budget as this will keep you from being tempted to 'dip' into your retirement savings.
3. Check out the internet for more information, read books, and learn by adjusting your spending habits. One of my favorite books which gives a clear understanding of what you are facing and is not trying to sell you anything ... is a book by Ben Stein and Phil Demuth called Yes, You Can Still Retire Comfortably!.
The key though is to start saving today...don't delay until tomorrow.
One percent, three percent, ten percent and more as you adjust your spending and begin to secure your retirement future.
And stay inspired my friends!