According to a recent Northwestern Mutual study, nearly 1 out of 3 Americans have less than $5,000 saved for retirement. The average retirement savings for all Americans is $84,821. That’s a far cry from enough. Experts typically recommend building at least $1 million in savings by retirement. So it doesn’t look good for the average American. And we aren’t doing much better up here. A CIBC poll shows that 32% of Canadians between 45 and 64 have nothing saved for retirement.
The 3 pillars of retirement savings
I recently finished reading a book called The Subtle Art of Not Giving a F*ck by Mark Manson, which explains that we can’t possibly care about everything in our lives because that would be too exhausting. So we have to choose what’s actually worth giving a hoot about. For those who are having trouble saving for retirement the best way to get ahead is to focus on a few things that will make a substantial difference. 😀
Below are 3 important factors that are absolutely the mutt’s nuts to building up a retirement nest egg.
This is the number one tool to accumulating wealth. You can’t have savings if you never have income. Prioritize finding new ways to make additional income. This could be through a side job. Investment income is another method that requires patiences but ultimately has extremely lucrative results. For example this is what consistently investing in dividend growth stocks for 10 years can do in a bull market. 🙂
Another strategy that usually gives a lot of mileage is to constantly apply for new jobs. Every month make it a goal to send your resume to a few different companies, and follow up with any interviews or feedback you get. The worst case is you decline a job offer with a lower salary than what you’re currently earning. But if you are offered a better compensation package then you’ll receive an immediate raise in your career, either by joining the new company, or negotiating a higher salary with your current employer. 😉
The primary goal here is to minimize unnecessary expenses. I would start by looking through my bank and credit card statements. Be mindful of every single purchase, one at a time, and ask myself if I can live without it to determine which expenses are needs vs wants. If I’m not saving enough money, then I’d be inclined to stop buying most or even all of the “wants” in my life until I can either make more money or find other ways to increase my savings.
A useful experiment I practice to control impulsive shopping is to compare potential purchases with an equivalent amount of cash. For example, if I want a new cardigan I see in a store window I would imagine it in a cardboard box, and its purchase price amount in cash in a separate box beside it. I would then ask myself which box would I take? If my answer is to take the box with money, which is almost always the case, then I just walk away from the store because it means I value the money over the clothing and therefore shouldn’t buy it.
This one is a bit tricky. It is a huge topic by itself, but that’s why it is probably the most important aspect of building wealth (and keeping it) especially during the mid and end game parts of your life. In addition to making money and being more confident and secure about your money, there are a lot of intangible benefits to learning how to invest. For example, those who understand how investments work are less likely to fall prey for a wide range of get-rich-quick schemes because they know better. As a true beginner, index investing, and dividend growth investing are great topics to look into as starting points to build a lasting retirement portfolio. Remember to plan for the long run, so it’s probably not a good idea to put short term bonds in a retirement portfolio. And be aware of tax implications when it comes to different investment vehicles.
If we choose only a few aspects of personal finance to give a hoot about it should be these 3 fundamental pillars.
- Having a high income gives us that large margin of safety and peace of mind.
- Having a high savings rate means there is less income to replace when we retire.
- And having the right investment portfolio will insure our nest egg will outlast us.
We don’t have to get everything right when it comes to financial management. But our retirement portfolios will greatly benefit as long as we strive to earn more income, retain more savings, and become better investors. 🙂
Random Useless Fact: