Retirement might seem far away, but it’s incredibly important to take the steps now to prepare for it. Whether you’re reading this at age 20 or age 60, start saving for retirement right now. Yes, this very minute! The earlier you start saving for retirement the better, due to the wonders of compound interest.
Put a Portion of Your Paycheck Away
Starting to save for retirement can be simple. If you’re working for a company that offers retirement benefits, start saving by putting a portion of your paycheck in your retirement account. If your company offers you a match, make sure you put in enough to get the full match (it’s free money, after all).
If your company doesn’t offer a 401(k) plan, you can fund your own IRA. If you’re self-employed, you also have several different options for retirement, from opening a SEP-IRA to a Solo 401(k). Speak to an accountant or other financial professional to find out which retirement plan works best for you.
If there’s anything that can hold you back from preparing for retirement, it’s debt. When your money goes to paying off debt, you’re not able to save it. Eliminating your debt means you can put your full focus toward your future, not your past spending.
When you save for retirement through investing in a retirement fund, compound interest works in your favor. When you have debt, especially high-interest debt like credit cards, the interest causes your debt to increase and multiply.
So, now that you’re placing a renewed focus on preparing for retirement, it’s time to kick your debt to the curb. Usually, there are two ways to do this: spending less or making more. I personally prefer to make more. After all, there are only so many expenses you can cut. However, making more isn’t in the cards, careful budgeting can help you identify expenses to cut back on.
Once you free up extra money by either spending less or making more, you can use the excess cash to tackle your debt by using the avalanche method or the snowball method.
With the avalanche method, you pay off your highest interest debt first (like credit card debt). With the snowball method, you pay your smallest debt first. Both are effective methods; which one you use really comes down to personal preference.
Earn That Raise
So, now that you’re putting a portion of your income toward retirement and working hard to eliminate debt, the next step is to work hard to keep earning raises. After all, the more money you earn, the more you can put toward your retirement goals.
There’s absolutely nothing wrong with asking for a raise or using some fierce negotiation skills when you get hired for a job. In my opinion, women don’t negotiate enough when it comes to salary, and it’s something I’d love to see change.
One tip I give to women who are working up the career ladder is to keep track of all the positive feedback you get. If someone likes your idea in a meeting, write it down. If a client sends you an appreciative e-mail, print it out and put it in a file.
Keep collecting evidence of your hard work and your contributions to your company. That way, when it’s time to ask for a raise, you can show your boss examples of your work. After all, why wouldn’t they want to reward an employee who has great ideas, always shows up on time, and who their clients or customers love? Even if you ultimately don’t receive a raise, showing your worth is still a good habit to get into.
Manage Your Lifestyle Inflation
Hopefully you do earn the raise you deserve after following the steps mentioned above. If so, be sure to keep your lifestyle in check. It’s tempting to go out and get a nicer apartment or finally upgrade your work bag to a designer version once your paycheck looks a little bigger.
However, one of the most financially savvy steps you can take is to increase your retirement contributions even more once you get a raise. I’m not saying you can’t treat yourself or go out to dinner as a celebration of your promotion. (That’s completely acceptable and encouraged.) What I don’t want is for women to fall prey to a lifestyle creep where they allocate too much money to the present and not enough to the future.
Each time you get a raise, be sure to keep paying future you, while continuing to avoid debt. If you can do this and keep your eyes on your retirement goals, you’ll be incredibly prepared for your future.
Are you currently saving for retirement? If so, are you maxing out your contributions every year? If debt is holding you back, what type of debt is it? Do you have any future plans for how you’ll conquer that debt so you can focus more on your retirement goals?
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