Investing to build wealth is not something that can be set on autopilot. Understanding the terminology behind your targeted funds, the diversity of your portfolio, and other factors in your retirement savings can be very confusing and overwhelming. The most important thing is to remain connected to the process. But, how can you avoid feeling disconnected from the facts and figures in your retirement savings?
Know Why It’s Important
For some, retirement plans are merely sheets of papers with numbers and ambiguous words. It is alluring to imagine your money locked into targeted retirement funds that are designed to accumulate wealth while you sit back and relax. However, when logging into your account to look at the overview, it is easy to feel disconnected from the numbers.
Largely, people feel distant because they have no reference point for those numbers. We can relate to expenses when we are constantly immersed in them. For example, when you look at daily expenses, it is easy to compare the price of your monthly mortgage to another expense, such as the number of monthly car payments that would equal. It is relatable when you review these numbers every month for your personal bills; your investment portfolio is no different.
The problem is that when you feel detached from your savings, careless mistakes are made. Your retirement savings figures are not just numbers with no meaning; they are a representation of your vision for the future. This means you need to find a way to connect those figures to your daily choices. So now the question is, how do you avoid feeling disconnected? Here are a few ways to get the ball rolling.
The Zero-Day method is the most simple and straightforward of techniques. Make a goal to spend no money on as many days as possible each month; you may even have to leave your wallet at home. On Zero Days, you should not be eating out at your favorite restaurant or on the golf course with the group. Eat the food you have at home, avoid coffee from the local coffee shop, and keep your money in your pocket rather than pursuing your hobbies.
It seems daunting, but strive to have between 20 to 25 Zero Days each month. This will remind you that you can still enjoy life without spending excessive amounts of money in the process.
"Media Diet" Trick
In the society we live in, it is very tempting to purchase and indulge with the click of a mouse. Succumbing to late-hour infomercials, enticing email deals, and click-bait offers can put a huge dent in your wallet. The Basics of Money blog expounds on this concept, but one option for avoiding impulse purchases is the Media Diet. If you are too tempted by online deals and TV ads, then refrain from visiting the websites you shop on most often and/or watching the channels that often lead to your impulsive purchasing decisions. Websites often save your credit card information to make it easier for future purchases. It can be helpful to remove this information to further discourage impulse spending.
One of the most important factors, mentioned by USNews, when saving for your retirement, is learning to balance spending and saving. As rudimentary as this sounds, not everyone is successful in stabilizing their budget. If struggling to balance what you save and spend is something that you have trouble with, consider the envelopes technique.
While reviewing your monthly budget, use physical envelopes with cash in them to budget out money for non-essentials, such as: hobbies, dining out, and entertainment. Each envelope is your spending limit for that activity. When the money in each category is depleted, you are no longer allowed to spend money on those categories for the month. This might sound restrictive, but it will help you achieve a true balance between spending and saving. It is a tangible and effective way to keep yourself accountable for your money.
Go "Back to the Future"
If you have seen "Back to the Future," then this movie can be your inspiration for staying in touch with your finances. In the film, Marty McFly has a photo of his family 30 years in the future, and watches the picture change as his immediate decisions make an impact on the state of the future. If you apply this principle to your savings, it is easier to visualize the influence that your decisions today will have on your future funds. Picture what you want to have when you retire, connect to your money, and know exactly what you need to have to make that vision a reality. Keep that vision in mind as you make decisions regarding your retirement plans, and you will create a better connection to those funds.
For more help, staying connected to your retirement needs and all the numbers, contact Manhattan Ridge Advisors.