You tuck away your pennies when you can, saving a little here and there. When you have some extra money left over from your paycheck, you put it into your savings account. You save when you buy generic lattes, and when you take your lunch to work. You’re proud of yourself.
You should be proud of these little habits, but they aren’t enough. They won’t lead to a quality life when there’s no work to be had and very little coming in from social security.
To have a successful retirement, we have to plan not only for having some savings — but for having enough to cover all the things that past generations used social security for. There has to be money for medical bills and the everyday costs of living, which are skyrocketing.
Planning for the future requires thought, effort, and discipline. To make sure you have enough money to live off of without sweating bills and medical needs, you need to be aggressive about putting away money now.
Use Burst Saving Instead
What you’re doing now is being complacent. You’re satisfied that you’re putting something – anything – away. The problem is that complacency won’t help you reach the level of financial comfort you’ll need later.
Burst saving will. This technique involves saving 15% of your annual earnings each year for 10 years.
According to a study by Hearts & Wallets, 64% of burst savers were able to save a nest egg equal to 10 times their annual salary. This is what’s usually recommended for a secure and comfortable retirement.
Using this strategy, you can boost your savings and increase your chances of socking away a million dollars before you retire. Even someone who has no savings can easily catch up and quickly fatten their financial padding.
The key is to make smart decisions about where to put that savings. You’ll need a minimum 5% return on your investment. You’ll also want to max out your 401K savings for the first three years before scaling back to the required contributions.
Burst Saving + Aggressive Tactics = Financial Success
Tuck away any and all earning hikes and bonuses into your savings. You’re already living on what you make. So put away the extra, and you won’t feel the pinch.
When you can, ramp up your 401K contributions. If your children aren’t living at home anymore, you can do with a little less each month, so push it over to your 401K. Or if your spouse gets a raise or new job making more money, put that extra into his/her 401K.
Watch your biggest ticket items. If you don’t need a home that costs $300,000, then don’t pay for one. If you don’t need a brand new Lexus (and you don’t), then why throw away your money on it? Pare down where you can. Live comfortably, but not extravagantly. (And be honest about what comfort is.)
DIY where you can. Buy a house you can fix up yourself. Not only will fixing up that house lead to a more attractive asset, but you’ll also have a hobby — and less time and money to spend on other things.
Drive your car until you can’t. Don’t trade up every few years because you need the latest model, or because you’re getting close to 100,000 miles. Stick with it; drive it and fix it until it doesn’t make sense to anymore.
You can only increase your main job’s salary by so much. Increase your earnings by taking on a side gig, and roll all your profit into your savings. If you do have room to increase your salary by making a career change, or by waltzing into your boss’ office and asking for a raise, then do it. (There’s a finesse to asking for and getting a raise: learn how to do it, and make yourself richer.)
Don’t forget that what you’re doing is going to improve your life when you’re older. Become a burst saver, and you’ll reach your million dollar goal sooner rather than later.
Have you ever heard of burst saving before? Would you try it?
- E*TRADE IRA - Official Site