Retirement Savings: 3 Frugal Habits That Can Get Your Retirement Back on Track

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With the many bills, goods, services and leisure we have to pay for in our daily lives just to get by, it’s easy for things like retirement to fall by the wayside, especially if the end of your working days still seems relatively far off. However, it’s never too late to get your retirement planning and savings back on track, and you don’t have to come up with huge sums to do so. Here, experts describe frugal habits you can adopt to prepare for retirement.

Focus on Needs vs. Wants

Trying to get your retirement back on track can be helped along by focusing on needs versus wants and the popular 50/30/20 rule, said Mark Harvey, a finance and investment consultant and founder of the personal finance site MarketHulk. This rule says “spend 50% of your monthly income to meet your needs. You can make efforts to reduce the next 30% as much as possible by making some compromises like recurring expense subscriptions and exercising at home instead of a gym membership.”

Buy Second-Hand Products

While new products are great, second-hand products can come at affordable prices and in good quality, Harvey said. With the help of such sites like Poshmark, eBay or even your local second-hand store, Harvey said, “If purchased with some effort then they are almost indistinguishable from new ones.”

Stop Eating Out  

Eating out is fun and convenient but those monthly entertainment expenses can add up, according to Ajay Singh, managing director of RetireBetter. “Eating at home, or reducing your entertainment expenses, is an effective way of finding more money every month to contribute towards your retirement plan.”

Make Your Money Work Better for You

In fact, according to the Bureau of Labor Statistics, the average American family spent $3,459 on dining out in 2018. Imagine what that could do in a retirement plan.

Other Ways To Improve Your Retirement Savings

Getting back on track isn’t just about being frugal. These other money tips can help you grow your retirement savings.

Find a Side Gig for Additional Income

Increasing your total income is a great way to get your retirement back on track, Singh said. “Use the opportunity to turn a passion or a hobby into a small business or find something that easily fits into your current schedule. Either way, the additional income can become a game-changer and quickly bring you back on track with your retirement savings.”

Automate Savings

It’s easy to put income toward expenses that are more immediate than retirement. Yet, Singh pointed out, “Consistent savings is the key to a retirement plan. The easiest way to do this is to automate transfers to your retirement fund. Those consistent contributions will grow into a surprisingly large number over time.”

Adopt the 1% Per Quarter Method

R.J. Weiss, a CFP® and founder of the personal finance site The Ways to Wealth, recommends a strategy that involves increasing your 401(k) contributions by 1% every quarter. “The idea is to make a significant long-term impact on your retirement savings without feeling a substantial pinch in your monthly budget. The incremental increases allow you to adapt to your new budget gradually, making it a sustainable practice.”

Make Your Money Work Better for You

Reverse Budgeting

Also known as paying yourself first, this method involves automatically transferring a predetermined percentage of your income to your retirement savings as soon as it hits your account, Weiss explained. “By doing so, you essentially hide money from yourself, making it easier to save because you can’t spend what you can’t see.”

Avoid Excessive Fees

Retirement plans typically have a bunch of hidden fees, as can financial advisors. Weiss said, “Paying a 1.5% fee to a financial advisor or a high-expense fund can significantly erode your savings over time. Opt for low-cost index funds or ETFs when possible and consider fee-only financial advisors who can provide unbiased advice.”

Budgeting Mastery 

If you don’t have enough income to put into retirement, or you’re not sure you do, it’s probably time to return to a budget, according to Kami Adams, a retirement income specialist with Creative Legacy Group. “Encourage individuals to create a comprehensive budget that allocates a portion of their income specifically for retirement savings. Prioritizing this commitment can make a significant difference over time.”

Debt Reduction

Of course, the most frugal of habits won’t help much if you’re deep in debt, Adams said. “Emphasize the importance of paying down high-interest debt, such as credit cards, which can free up more funds for retirement savings.”

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