As you build your retirement fund, you'll likely experience some bumps in the road along the way. One of the most common problems you'll encounter is an inability to make your monthly retirement contributions.
You may set up automatic payments (Standing Instruction) from your banking account into the investment account you are building your retirement fund with. Once it's set up, each time you get your paycheck, your desired savings contribution will go right out to your investment account before you have a chance to spend it.
If you do dig yourself into a deep hole of credit card debt, it's important you deal with the problem as quickly as possible. Create a feasible budget so that you can reduce your debt and make sure you stick to it.
Consider consolidating your debts into one account - this can lower your overall interest rate and help you pay off those debts quicker.
Getting into the Game Late
If you are beginning your retirement savings late in life, the first thing you can do is create a budget for your current expenses so that you can maximize monthly contributions to your retirement fund. For example, by skipping occasional dinner out may save you hundres of dollars. This can go a long way to boosting your retirement savings.
Alternatively, you may consider finding a second job or a part-time job. This may be a feasible way to catch up. Or by converting part of your residence into an income-generating asset can do wonders for your overall retirement plan.
Quick Steps on Undertaking a Gap Analysis
Gap Analysis is a strategic planning tool to help you understand where you are, where you want to be and how you’re going to get there.
Step 1: Identify the type of retirement that you want. For example, you can decide the activities you would like to participate in, such as travel or taking continuing education classes, estimate as accurately as possible the cost associated with each.
Step 2: Identify your current financial standing and how much you would like to have with a given time frame. This can be done by checking the balances in all your accounts including investments and calculate how much you will need to save to reach your goals.
Step 3: Create a plan of action and start to bridge the retirement gap. This can be done in many ways. By lowering your regular monthly bills as much as possible. Pay off your mortgage, or downsize your home. Bridging the retirement gap is not only about making and saving more money. Pay off all the debts you can before leaving work. Every dollar that doesn't go out means another dollar in your pocket.
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