Ever thought about how long you might have to work? 40 years? 50? How about 60? If 60 years sounds ridiculous, it might not be. The reality is people are living longer, which means there’s a chance you could outlive your money.But, you’ll be better off if you plan ahead.
“Even if you’re just starting your work life, it’s smart to dream about what it would be like to not have to work,” explains Bill Taylor, Northwestern Mutual vice president of financial planning. “And that’s really what retirement is. It’s no longer a gold pocket watch, a pension and a rocking chair. It’s doing what you want when you want to do it – like opening a book store, traveling or doing volunteer work.”
“What you do in your 20s can make a huge difference in your ability to retire when you want to,” says Taylor.
Consider the following tips:
- Maintain a budget. Know exactly what you need money for and where your money is going. Keep expenses down by making practical choices, such as sharing housing or using public transportation. Budgeting doesn’t mean you can’t go out on Friday night, but it helps you live within your means and watch your cash flow. Note: If you don’t already have a written budget, our budget tool can help. If you’re looking for an everyday app to track your expenses, check out something like Dollarbird.
- Get into a habit of saving – for a rainy day, for big goals like buying a house or for retirement. The earlier you start saving and the more systematic you are, the easier it seems. As your income grows, you’ll be able to save more as well as have more in your pocket.
- Steer clear of debt. Avoid it whenever possible. If you use credit cards, pay off the balance each month. For all financial obligations, be clear on the balance due, interest rate, repayment options and costs involved. Pay on time to avoid late fees, higher interest rates, and hurting your credit rating.
- Get with the program. If you’re working and your employer offers a retirement plan like a 401(k) or 403(b), take advantage of it. Start as soon as you can and try to contribute at least as much as your employer will match. Time is on your side – it’s one of the best and easiest investment advantages there is. The longer your retirement savings can grow, the more it will multiply due to the benefits of compounding.
- Find a coach. Don’t do it alone; a financial professional can help you build a comprehensive financial plan, recommend ways to protect your income, and help you stay on track.
“Getting started on the road to financial security is often the hardest part,” says Taylor. “But the earlier you save, and the more often you save, the more options you’ll have. No one else is going to do it for you and, given the time value of money, starting now can make all the difference for the future you.”
For a look at how long you could live, explore Northwestern Mutual’s Lifespan Calculator.
Hear how to demystify retirement savings from theMintGrad contributor Chantel Bonneau.