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Let’s assume you’re a little late to the retirement savings party and are starting to feel left out, or worse, like you’ll never be able to catch up and save enough to fund a retirement that isn’t predicated on eating cat food. If this sounds like your situation, stop stressing. I’m here to tell you it’s not too late. And to prove it to you, I’ll retell our comeback story and give you some solid actionable tips to get your money moving in the right direction. Ready? Let’s go.
Retirement Anxiety
When it comes to being behind the financial 8 ball, I know exactly how you feel. Although I started saving for retirement in my early 20’s, I also paused contributions for years in my early 30’s and tapped my nest egg by taking a 401(k) loan. Thinking back, it was a huge mistake. At the time, I needed the money to restart my life after a long-term relationship fell apart. It was survival money.
It doesn’t really matter the reason you’re behind on retirement savings. Maybe you went through a divorce, maybe you had health issues, or maybe you just didn’t realize how important saving for retirement was when you were younger. Like I said, it doesn’t matter.
What does matter is that you change your financial habits and make saving for retirement a priority. Unless you’ve been burying your head in the sand, you’re well aware that this country is facing an impending retirement crisis when Gen-Xers and Millennials hit their golden years.
What Retirement Crisis?
According to an article published by MarketWatch, a leading financial website, the recommendation that 35-year-olds have at least twice their annual salary in retirement savings is not only doable but necessary. According to a flurry of irritated and annoyed responses on Twitter from people in both age groups, that recommendation is completely unrealistic and only optional for “rich” people.
The article created such a stir, in fact, that the Huffington Post published a second article addressing the angry Tweets and subsequent memes that followed.
Now, I’m going to go out on a limb here and assume that you’re not going to want to be a part of the impending crisis when it hits. If my assumption is correct, check out what we did to turn our money on its head and make wealth accumulation a priority so we can fund a cozy retirement.
When We Realized We Could Be In Financial Trouble
My longterm readers might already know the backstory around the moment Mr. MMM and I realized we could be in financial trouble down the road if we didn’t clean up our act. For those people, feel free to skip over this section and get right down to the 7 actionable tips below.
If you happen to be new around here, you might enjoy this story and even relate to it. For those people, keep reading.
When Mr. MMM and I met, we were still operating from a position that we had PLENTY of time ahead of us to focus on adult stuff – like saving for retirement. Then one day we woke up and realized we were so wrong.
We both knew that we weren’t in our 20’s anymore – or even our early 30’s – but we were still living like we were. There were weeks we thought nothing of going out to eat several times or dropping $50 on movie tickets and popcorn on a whim. We really were blowing through our money like tomorrow didn’t matter.
The culmination of this was when we were planning our wedding and trying to buy a bigger house at the same time. Talk about spending a ton of money all at once. Wow, we were on fire…and not the good kind.
It was then that we realized how much debt we were getting ready to sign up for just to have a bigger house in a slightly better location. It also hit us like a ton of bricks that we weren’t spring chickens anymore and we needed to start acting that way. Womp. Womp.
Other articles you might enjoy:
- Proof You Can Royally Mess Up With Money And Still Retire Early
- 5 Reasons You Need To Track Your Net Worth To Build Wealth
- 9 Money Hacks That Took Us From The Poorhouse To The Penthouse
- Stuff We Just Stopped Buying
- Avoid Overspending By Following The Rule Of Half
What We Did To Turn Our Financial Ship Around
The first thing we did to right our financial ship was to cancel the contract to purchase that big house. Fortunately, the home inspection was unfavorable and demonstrated quite a bit of mold. We took that opportunity to walk away while still getting our $8k deposit back. After getting that cash back, we immediately threw it at our debt and reduced our load (at the time, we were still carrying car loans, a student loan, and two mortgages – 1 for our rental property and 1 for our primary home).
On top of that, we started slashing our monthly expenses by adopting a frugal mindset and tossed all of our extra money at paying down our debt and building wealth.
Nowadays, we look for every opportunity to cut costs and invest as much money as possible. And we love it. It’s such a change from how we used to manage our lives. There are no more sleepless nights or rising tensions over how we’re going to pay for something or invest for the future. #winning
If you’re ready to take control of your money so you can sleep again, check out these 7 tips you can start doing today!
7 Tips You Can Start Today To Have A Fabulous Tomorrow
- Make a financial plan and budget – If you want to immediately reduce your anxiety around money, do this today.
- Start contributing to tax-sheltered and tax-advantaged plans – If you’re not already doing this, you need to be. Take advantage of any tax-advantaged plan and make sure you get the full company match if you have an employer-sponsored plan that offers this.
- Step up your contributions – The current maximum contribution for a 401(k) plan is $19,000/yr. Obviously, there is a big spread between contributing $0 and contributing $19,00. If you happen to be on the lower end of that contribution scale, stepping it up whenever you get a raise or promotion will do wonders to catapult your retirement savings into the stratosphere.
- Eliminate debt – Incorporate the elimination of debt into your monthly budget. There are two main strategies that are typically followed: The Debt Avalanche or the Debt Snowball. Pick one and roll with it.
- Decrease expenses and increase income– This is self-explanatory. Eliminate or decrease your cable and/or phone service, start carpooling to work, pack your lunch, etc. You got this.
- Continue to save and invest more money – When your gap grows (the amount of money between your income and expenses), increase the amount of money you’re saving and investing to avoid it being gobbled up by eating out (no pun intended) or unplanned entertainment.
- Stay the course –If you stay focused and continue to eliminate debt, grow the gap, and invest the difference, you’ll be amazed at how quickly you’ll be able to make progress. As a savvy fish once said, “Just keep swimming!”
Bonus: Track your net worth – This was hands down the best thing we did to stay motivated while turning our finances around and paying off debt. If you’re interested in doing the same, this is the tool we used and still use. 🙂
So, see, saving for retirement doesn’t have to be scary, and getting a late start isn’t the end of your retirement – or even early retirement – dreams.
By following the outlined tips above, you, too, can look forward to a fabulous retirement while you’re still young enough to enjoy it.
What are your thoughts on the looming retirement crisis? Did you get a late start? We’d love to hear from you in the comments!
