Saving for retirement is usually something that takes 15-25 years for successful people to achieve. There are a few people that manage to save over 75% of their paycheck due to higher incomes and extreme frugality. These ultra-frugal people often achieve freedom in 5-8 years, but this is rare. For the rest of us, saving for our retirement requires a measured approach and a good degree of patience too.
Here are a few steps to start you off on the right path.
Focus on Increasing Income
Whether through advancement in a job, a better qualification or by taking a second job, boosting your income makes a huge difference to what you can save and invest towards retirement. The key reason for this is clear – with your living expenses already covered, all the net proceeds of an increased income can be slid across into savings.
Even for people who choose to spend a portion of every salary increase or bonus to treat themselves, they can still financially benefit due to higher savings over time.
Embrace Selective Frugality
Frugality is a useful tool to reduce spending and free up cash to save. It should be balanced at a level that you’re comfortable with. If you don’t do so, then it will feel more like penance or a penalty that you’re suffering through. This is especially true if you’re trying to get the total household spending down between yourself and your partner who may resent attempts to lower his or her spending level along with yours.
The best approach to frugality is to cut out needless spending and things that you get little pleasure from. Replace some of them with upgrades in the areas where you get the most enjoyment or use, and save the rest. Doing things this way, being frugal doesn’t feel restrictive and supports your long-term goals.
Don’t Get Sued!
It may seem like an odd thing to include in an article about saving for retirement, but it’s an important element to bear in mind. As the lawyers from Tully Rinckey would confirm, defending a lawsuit or even the potential threat of one is a costly endeavor because you’re paying highly-trained, well-qualified individuals to work on your behalf which is never cheap.
Do the right things, avoid ruffling the wrong feathers and wherever possible, do not deal with people who are known to be litigious in their dealings with others. In the end, it doesn’t matter what the potential upside might be if a customer or business partner could create a devastating downside should they go legal on you. At which point, all bets are off for your retirement until the outcome and the full financial cost are both known.
Saving successfully for retirement while avoiding costly blunders like being sued or serious setbacks like getting divorced isn’t easy but it has to be done. It’s only in this way that you can get a little older and set your sights on a future with less (or no) work included.