Balancing Your Retirement Savings and More Immediate Saving Goals
We all know that saving up for retirement is a big deal. You’re supposed to have $X saved up by X age, and if you don’t, then who knows if you’ll have to end up working your 9-5 forever… Yikes! But balancing your retirement savings and your other savings goals doesn’t always seem doable. How can you put money away in savings for long-term goals, like buying a house, when you also need to put money aside for short-term goals, like an emergency fund?
While saving up for retirement seems like a daunting and perhaps impossible task when you have a tight budget, it is certainly possible! In this post, we’ll go over 5 steps that will help you plan, budget, and creatively save without having to compromise your other financial goals.
Step 1: Set attainable goals
The first step to establishing a substantial retirement fund is figuring out where you’re at and where you’re headed as far as your retirement finances go. To help you get an idea, you can quickly search “what is the average retirement income?” and you’ll find some goals that can help guide your savings strategy.
According to AARP, you should have approximately 10-12 times your current salary saved up for your retirement in order to do so comfortably. Yes, it sounds like a lot…because it is. But you’re here and ready to start saving, so you deserve a pat on the back for that! By starting ASAP and outlining some monthly and annual goals, you can definitely work your way toward that number before you know it.
If your employer offers a retirement plan, like a 401k, you may want to jump on that immediately to start building your savings into an account with tax benefits. Otherwise, an IRA or other individual retirement account could also provide tax benefits while you save (double bonus).
Once you have some sort of savings account dedicated toward your retirement, it’s time to make some contribution goals. You’ll want to make them somewhat challenging (especially if you’re nearing retirement), but also attainable. Take the age you want to retire and the amount of money you wish to have saved up, and find the difference in between years. From there, break that number down into monthly or weekly savings goals.
Note: If you have a 401k, you can set up automatic contributions with your employer so that you don’t even have to think about putting money aside!
Step 2: Prioritize
Now that you have your savings goals in place, it’s time to compare these to your more immediate financial goals. Perhaps you want to put a downpayment on a house or maybe you’re planning a vacation abroad. Assign a number to each of these goals and consider which ones are more attainable and which ones matter most to you now, in 5 years, and in 10 years.
Keep in mind, some investments you might make now could help fund your retirement later on. Be sure to consider each option thoroughly!
Once you choose a select few savings goals that fit within your priorities and financial goals, it’s time to begin budgeting.
Step 3: Develop a budget that sticks
At this point you have your retirement savings goals and your immediate goals outlined with numbers assigned to each. Now, you can calculate your monthly income (after taxes and insurance contributions) to help you put leftover money toward your savings goals.
Note: If you have automated contributions set up, it’s even easier to balance your other financial goals because you can factor them into the deductions taken out of your monthly income!
Step 4: Check in and change as needed
As we all know, change is inevitable. Your income may fluctuate (for better or worse) and therefore, your savings goals and progress may change, too. This is why it’s important to adjust your financial planning periodically to reflect your current situation. Set a calendar reminder to review your progress and make any necessary changes at least once a quarter.
Step 5: Enjoy the fruits of your labor!
After all of your dedication in the workforce and hard work saving money for retirement, it’s time to enjoy it. Use these tips to help you optimize and achieve your retirement savings goals.