Saving for retirement doesn’t have to be overwhelming if you break it down into little steps. “Money is an intimidating topic to many of us,” says Cary Carbonaro, Certified Financial Planner, author of “The Money Queen’s Guide: For Women Who Want to Build Wealth and Banish Fear” and managing director of United Capital of New York & New Jersey. “And women often put others’ needs, like our kids’ hobbies or college, before ourselves. But we’ve got to have a vision about what we want for our future to help us get into the habit of saving.” Here’s how to do it with relatively little pain and fuss:
1. Save without thinking.
You’ve heard it before, but paying yourself first is not an option, it’s a necessity. “Making savings automatic is probably the most important point I make to women. Just set it and forget it,” says Carbonaro. “If we have a choice to save or not save, human nature is going to spend, so set aside a certain amount on auto-pilot that goes directly into your 401K or an IRA. You won’t miss what you don’t have in your hands in the first place.”
2. Get over the ‘it’s too late’ syndrome.
Sure, if you’d started socking it away in your 20s, you’d be in better shape now. But don’t throw up your hands and give up, no matter where you are in life. “It’s never too late to do something toward your future,” says Carbonaro. “Maybe you can’t retire in your 60s because you need more time to build savings, but you may be able to retire in your 70s.”
3. Don’t waste employee benefits.
“If your employer offers a retirement plan, max it out,” says Elizabeth Revenko, CFP ®, senior financial planner with Mosaic Financial Planners, Inc. in San Francisco. Most employers with a 401(K) plan match a percentage of what you contribute. “Simply put, that’s free money,” says Revenko.
4. Make spending painful.
“Pay with cash,” says Revenko. “When you use cash instead of your debit card, it’s more real. You’re aware of how much is actually leaving your hands, which decreases your enjoyment of spending. Paying with cash can help you preserve more money so you actually can save it.”
5. Plan ahead for windfalls.
Decide what you’ll do when bonuses, raises, tax refunds, and rebates come your way. “Know what you will do ahead of time with unexpected cash,” says Revenko. “Learn to divide it into percentages for fun, for paying debt, building your emergency fund, and investing. That way you’ll enjoy it and be responsible at the same time. This helps you learn balance in living for today with saving for tomorrow.”
6. Do your homework.
You don’t have to obsess over your finances, but you do have to put forth a little effort. “We don’t bat an eye spending time baking an elaborate cake or creating exquisite Easter eggs because those are projects we love,” says Kathryn Hauer, CFP ®, founder of Wilson David Investment Advisors in Aiken, South Carolina. “We might not love the idea of reducing expenses to find money for savings or using a retirement calculator, but those are essential steps to a good retirement.” Start your research at websites that aren’t trying to sell you anything such as the Department of Labor’s Retirement Tool kit and the U.S. Securities and Exchange Commission investment site.
7. Organize your records.
“Most of us have pieces of financial stuff all over the place so we don’t know what we have. Half the battle in financial planning is keeping good records,” says Hauer. “Make it a pleasure by using attractive cabinets or pretty boxes, and you’ll be more likely to do it.” Gather documents from any 401(K)s from different jobs you’ve held over the years, IRAs, savings accounts, stocks you inherited from family, and so on. While you’re at it, make a simple chart of what’s coming in and going out. Putting it down in black and white gives it a whole new perspective.
8. Dejunk your house.
It may not be a huge score, but it adds up. Go through your garage, attic, and house one room at a time to find items to sell at thrift stores, consignment shops or tag sales. “Look for what you’re not using or no longer enjoy,” says Hauer. Don’t keep something out of guilt because you inherited it or someone gave it to you as a gift; you’ll be better off turning it into part of your savings. Make it a part of your seasonal routine to purge, then stash the cash in your retirement fund.
9. Invest in yourself.
Even if you don’t belong to an employer-sponsored retirement plan, you can save for retirement. Open a spousal IRA, in which the working spouse makes contributions. Or if you’re self-employed, start your own Simplified Employee Pension Plan (SEP). Or start your own side business to nurture financial independence, suggests Carbonaro.
10. Plug little holes that drain your resources.
Open a credit union account so you won’t get dinged with a service charge if your balance falls below a minimum amount. Negotiate with service providers, such as cell phone or cable companies, on a regular basis to ask for a reduction in monthly bills (ask if they have any current deals or loyalty credits). Get rid of one unnecessary expense -- the gym membership you don’t use, the home phone when you only use your cell phone. “Then redirect these funds into savings,” says Hauer. “Over time, every little bit counts.”