In today’s economy, it can be difficult to justify taking your hard-earned money and investing it in something that won’t benefit you until years later, but the simple truth is that too few of us are making an investment in our futures a priority. By the time many people do, it’s often too late to make much of an impact before retirement age hits.
But your life story doesn’t have to follow that arc. There’s a multitude of small, simple steps you can take to start investing your money now so that later in life you’ll be able to reap the financial benefits. Here are 5 easy ways to start planning for your retirement now.
For most of us working a regular 9-5 job, this is the single most effective form of investing available to us. Basically, many employers offer to match your contributions to your retirement fund or 401k up to a certain percentage, usually between 3 to 6% depending on the company. The best part is that because it’s a contribution to your retirement, the amount your employer gives isn’t taxed as income, but at a lower retirement rate.
Essentially, the more you invest in your retirement, the more your employer matches, even if that money won’t be accessible until you reach retirement age. While it may be painful to have a slightly smaller net income in the short-term, not contributing the maximum to your retirement is essentially leaving free money on the table.
One of the main reasons people do not invest in retirement is the hassle of it: having to remember to log in to our bank accounts and move the money around manually month after month after month. Luckily, in today’s digital world, it’s easy to automate your bank accounts so that a certain amount of each paycheck is automatically transferred to your investment or retirement fund. By removing the human factor from the act of saving you never need to worry about saving for your future. Another benefit to this is you can increase the amount of your deposit when you receive raises. This way you increase your savings without adjusting your lifestyle to your increase in income.
And speaking of savings you won’t even notice, another way to give your retirement a boost is to orchestrate a 10% cut of your expenses across the board and put the savings into your retirement fund. 10% is a small enough percentage that you won’t feel too much of an impact in your day-to-day life, but that extra contribution over twenty or thirty years will give your savings a major boost, especially when you factor in compound interest.
This doesn’t seem like it would fit in an article about saving for the future, but debt often stands in the way of effective and consistent investing: instead of slowly growing your overall financial worth, debt eats away at it. The interest you pay on your debt will always be higher than the positive growth of a retirement program. For example, if your retirement fund grows at by 5% a year, those gains are easily negated by carrying credit card debt, which has an average APR of around 15 to 20%.
There are valid and responsible ways of using a personal or installment loan for short-term strategic reasons, but any responsible retirement plan on your part should start by paying off any debt you have hanging over you and preventing more from piling up in the future.
For many people, the concept of investing conjures up images of spreadsheets, boardrooms, and maniacs screaming on the floor of the stock exchange. And while this is a fairly accurate picture of what goes on behind the scenes in the world of traders, it is far removed from the reality of actually investing as an individual. One of the easiest and most effective ways of investing your money is with a mutual fund.
Instead of putting money in a single stock, a mutual fund diversifies your investments so that no matter how much any single stock rises or falls, the fund as a whole will still remain stable and continue to grow. It’s safer, and in the long-term, a more effective way of growing your money.