There is never a wrong time to begin tracking your income and spending, but truly the more thoroughly you understand your money habits and gain control of your budget, the more quickly you will be able to take charge of your future. When retirement is just around the corner, you may feel you’ve lost valuable time to gain control of your finances, but there is still time.
Here are three strategies to help you set up a workable budget and stick to it:
- Save more money. This may seem a simple solution, but in many cases the simpler the solution, the easier it is to implement. Once you’ve charted your income and expenses, you can look at what’s left over and make a decision to bank 10 to 20% (or more) of your income. If you find that 10% is too much, start smaller and work your way up. Being successful at socking away 3% of your income weekly will help you build toward a higher percentage going into your savings on a regular basis. Once you discover that you can live without that additional 3% or more you can move your savings amount up to the ultimate goal you’ve chosen.
- Spend less money. Saying you’re going to “save money and cut expenses” is a vague generalization and won’t offer a measurable goal. Set a specific goal of, “I’d like to spend $10 a week less on take-out food,” or “We’re not going to use a credit card for purchases of less than $100.” Those goals are measurable and achievable. Unsubscribing to department store emails and updates may help you save money because you won’t be tempted to give into an impulse purchase. Also, before you make a purchase over a certain dollar amount, take time to ponder that purchase. Studies show that individuals that don’t give into an impulse purchase, but who instead take a few days or a week to determine whether they truly need an item will spend close to 25% less annually than those who purchase on impulse. Consider the impact on your long-term financial goals before making a purchase of a large ticket item.
- Pay down your debt. Paying down credit card balances, especially as you near retirement age, makes incredible financial sense. Paying down your debt also allows you the opportunity to put more money into your bank account. In addition to freeing up your money, paying off debt can also lower your stress simply because they won’t be looming over your retirement years. You may need to put the brakes on some of the activities you currently enjoy such as dinners out with friends, splurge purchases, etc. Look for free or low cost entertainment options, invite friends to a potluck at your home, take time to consider whether you truly need that large ticket item. If you know, for example, that you have set a goal to pay cash for all purchases of $50 or less it may make you pause to consider whether you need to make the purchase at all. Putting an item on a credit card rarely requires thought and is usually not thought of again… until the bill comes due.
Having sound financial practices in place prior to your retirement will help you more fully enjoy your golden years.