Now comes the tough part. You have a rough idea of how much you need to save each month to reach your retirement goal. But how do you find that money? Where does it come from?
There’s one simple trick for saving for any goal: spend less than you earn. That’s not easy if you have trouble making ends meet or if you find it difficult to resist spending whatever money you have in hand. Even people who make high incomes often have difficulty saving. But we’ve got some ideas that may help you.
Let’s start with a “spending plan” — a guide for how we want to spend our money. Some people call this a budget, but since we’re thinking of retirement as something to buy, a spending plan seems more appropriate.
A spending plan is simple to set up. Consider the following steps as a guide, but you may want to use a computer program.
Income. Add up your monthly income: wages, average tips or bonuses, alimony payments, investment income, unemployment benefits, and so on. Don’t include anything you can’t count on, such as lottery winnings or a bonus that’s not definite.
Expenses. Add up monthly expenses: mortgage or rent, car payments, average food bills, medical expenses, entertainment, and so on. Determine an average for expenses that vary each month, such as clothing, or that don’t occur every month, such as car insurance or self-employment taxes. Review your checkbook, credit card records, and receipts to estimate expenses. You probably will need to track how you spend cash for a month or two. Most of us are surprised to find out where and how much cash “disappears” each month. Include savings as an expense. Better yet, put it at the top of your expense list. Here’s where you add in the total of the amounts you need to save each month to accomplish the goals you wrote down earlier on the 3"x 5" cards.
Subtract income from expenses. What if you have more expenses (including savings) than you have income? Not an uncommon problem. You have three choices: cut expenses, increase income, or both. Cut expenses. There are hundreds of ways to reduce expenses, from clipping grocery coupons and bargain hunting to comparison shopping for insurance and buying new cars less often. The section that follows on debt and credit card problems will help. You also can find lots of expense-cutting ideas in books, magazine articles, and financial newsletters.
Increase income. Take a second job, improve your job skills or education to get a raise or a better paying job, make money from a hobby, or jointly decide that another family member will work.
There’s one simple trick for saving for any goal: spend less than you earn. That’s not easy if you have trouble making ends meet or if you find it difficult to resist spending whatever money you have in hand. Even people who make high incomes often have difficulty saving. But we’ve got some ideas that may help you.
Let’s start with a “spending plan” — a guide for how we want to spend our money. Some people call this a budget, but since we’re thinking of retirement as something to buy, a spending plan seems more appropriate.
A spending plan is simple to set up. Consider the following steps as a guide, but you may want to use a computer program.
Income. Add up your monthly income: wages, average tips or bonuses, alimony payments, investment income, unemployment benefits, and so on. Don’t include anything you can’t count on, such as lottery winnings or a bonus that’s not definite.
Expenses. Add up monthly expenses: mortgage or rent, car payments, average food bills, medical expenses, entertainment, and so on. Determine an average for expenses that vary each month, such as clothing, or that don’t occur every month, such as car insurance or self-employment taxes. Review your checkbook, credit card records, and receipts to estimate expenses. You probably will need to track how you spend cash for a month or two. Most of us are surprised to find out where and how much cash “disappears” each month. Include savings as an expense. Better yet, put it at the top of your expense list. Here’s where you add in the total of the amounts you need to save each month to accomplish the goals you wrote down earlier on the 3"x 5" cards.
Subtract income from expenses. What if you have more expenses (including savings) than you have income? Not an uncommon problem. You have three choices: cut expenses, increase income, or both. Cut expenses. There are hundreds of ways to reduce expenses, from clipping grocery coupons and bargain hunting to comparison shopping for insurance and buying new cars less often. The section that follows on debt and credit card problems will help. You also can find lots of expense-cutting ideas in books, magazine articles, and financial newsletters.
Increase income. Take a second job, improve your job skills or education to get a raise or a better paying job, make money from a hobby, or jointly decide that another family member will work.
Source: www.dol.gov
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