Step 7: Create a Retirement Budget
Your budget needs to include:
- How much money is coming in.
- How much it will cost to reach the goals you identified in step 1.
- How much debt you have.
Start by tracking your income and expenses for a couple of months. Next, figure out how much money you'll need in retirement to support your chosen lifestyle. You'll also need to do a financial checkup of your investments. Make sure you are diversifying your money into multiple investments, investing in things you understand and going with those investments that won't cost you a ton in fees. If you are carrying debt, make sure your budget includes monthly payments to knock it down. Once you have a budget you know you can stick to, start putting it into action. AARP's Retirement Calculator can help you take a deeper look at the numbers.
Step 8: Find New Ways to Cut Your Expenses (Start Saving More)
Your retirement may be right around the corner or years away. Regardless, saving more now will always make you better prepared. That doesn't mean all of your extra cash has to go into savings, but now is the time to find new way to cut your expenses. Start by listing your bills and then figure out ways to trim them. Maybe you don't need 100 cable channels or to eat out three nights a week. Even cutting one movie night a month can bring you closer to your retirement goals.
Got a green thumb? Growing your own vegetables can save you money that can be socked away for retirement. Don't ignore your debt as a way to save more. Cutting your debt now will mean less worry when you retire. One strategy that works for many people: Pay off your smallest debts first, regardless of interest rate. This gives you a sense of accomplishment and empowers you to go after the bigger debts, knowing you have the willpower to eliminate debt.