At the end of the month, do you wonder where all your money has gone? If you’re not sure, it’s time to take control of your cash flow. Once you know exactly where you’re spending your money, you can figure out where to cut back. Then you’ll be able to set more aside for retirement and really start building up your plan account.
Track Daily Spending
You’ll first need to keep track of your daily spending. Record everything you spend each day, including purchases that cost only a few dollars. Those miscellaneous items can add up more quickly than you realize.
Figure Out Monthly Expenses
Next, add up how much you spend each month on food, housing, transportation, clothing, health care, etc. Also, figure out the monthly amounts for expenses you pay only once or twice a year, such as insurance and property taxes.
Compare Expenses and Income
If your expenses exceed your income, you need to look for areas where you can cut back spending. You have a lot of control over your variable expenses, such as food, clothing, entertainment, and gifts. For example, you can choose to eat out at restaurants and go to the movies less often.
Your fixed expenses, such as insurance, mortgage or rent, and car payment, are the same each month. You should look at these expenses and see if you can find more affordable alternatives. For example, are you getting the best deal on your auto and homeowners insurance? Cutting back on fixed expenses can also help you spend less each month.
Build Up Your Savings
Spending less will mean having more money available to save for your retirement. Consider simply increasing the amount you contribute to your plan. Your plan’s payroll deduction feature makes it easy to save since your contributions are automatically withheld before you receive your pay. Building up your savings is an investment in your future.
Impact of an Increase
Over time, even a small increase in your monthly contribution could have a significant impact on your account value at retirement.
You could accumulate this much more in your account after:
If you increase your contribution by:
|20 Years||30 Years||40 Years|
|$25 a Month||$13,023||$30,499||$65,620|
|$50 a Month||$26,046||$60,999||$131,241|
|$100 a Month||$52,093||$121,997||$262,481|
This is a hypothetical example used for illustrative purposes. It is not representative of any investment vehicle. It assumes monthly compounding and an average annual total return of 7%. Your investment results will be different. Pretax savings and related earnings will be taxed on withdrawal.
If you have any questions on building your retirement savings, contact a Security National Bank Wealth Management advisor to learn more.
Source: DSTBack to Articles