One question I get asked a lot is how to catch up on retirement savings. This question comes from people who are getting serious about retirement for the first time, or people who have been saving but got off track. They lost their job or had a baby or just got lazy, and now they’re trying to catch up.
When you’re behind on funding your retirement savings, you have two choices: You can give up and pretend that retirement won’t eventually happen, or you can get serious about planning for your future. And you need to get serious, because retirement is coming. When you decide to take action, you can start with these basic steps:
1. Look at Your Budget
Find the gaps or holes that are causing you to lose money. For example, decide if you need a telephone landline for your home. Could you get rid of it and go with your cell phone only? Saving an extra $25 a month over 25 years could gain you an extra $30,000! Another area where people can cut costs is their cable or satellite bill. Could you use a streaming service instead? If you lower your budget by $100 a month by trimming back in multiple areas, that $100 could result in over $75,000 in 20 years. In 25 years, you’ve got almost $130,000. Watching fewer reruns pays off—literally!
2. Look Around the House
What could you sell? My wife and I made over $500 on a garage sale, and that’s a beautiful thing for a few hours’ worth of work. You may not think that would matter, but what if you did a garage sale once a year for 10 years? That extra $500 a year could seriously add up! There’s no reason to keep stuff that’s just gathering dust and taking up space.
3. Look at Your Skills
What could you do to earn extra money? Perhaps you have a hobby that could earn you some cash. Maybe you could deliver pizzas a few nights a week. You could even be a bus driver, security guard or custodian on a part-time basis. That means you’ll need to sacrifice in other areas, but I don’t know anyone who has gained anything significant without sacrifice. Maybe you will watch less TV or miss out on that night out with friends. You don’t have to give it all up permanently, but a few months of sacrifice will be worth the reward in retirement.
If you keep doing what you’ve been doing, you’ll keep getting what you’ve been getting—an underfunded retirement account. You have to change your behavior if you want that dream retirement. Ask yourself what you can do tomorrow or next week. Then do it. Remember, you’re changing not only your future, but also the future of those you love—possibly for generations to come.