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Do you know how much money you will need to retire if you are currently in your 30s? What about ways of earning this money in time to ensure that you will never have to struggle as you get older?
It is essential to know how to plan for retirement in your 30s because money is always tight. It has become a pipe dream to afford a home and start a family.
Many people live paycheck to paycheck, which makes it even harder to do any retirement planning. Here are the 10 best tips that will help you stretch your dollar to a livable future.
How to Plan for Retirement in Your 30s?
Below are the best underlying principles that will help any 30-year-old secure financial independence within the next few decades. With these tips, you can find yourself in great shape as you approach retirement.
1. Time Value of Money
This is one of the most underrated things that many people struggle to wrap their heads around. For instance, if you deposit a few thousand dollars into a Roth IRA every year for the next 30 or 40 years while earning a decent percentage return, you could amass enough to live off without working in your old age.
However, this needs to be done as soon as possible. If you put off saving for another decade, you will end up with even less money down the line when you must retire from the workforce.
2. Be More Disciplined
The goal is to save at least 3% of your income and bump it up an extra percentage every year as you start making more. This should be done until you reach an IRS-mandated maximum for a 401(k) if you are younger than 50. However, you should always keep track of this maximum because it can change throughout your working life.
These small incremental steps to save money can make a massive difference when you look back 40 years later and see how decent your savings account looks. Although there will be times you may need to back away from savings to spend on emergencies, you should still try your best to be as disciplined as possible.
3. Build an Emergency Fund
When planning for retirement, you should always think about the kind of emergencies you may have in life. For instance, you may suddenly have to move houses after a fire or pay for a new baby you were not expecting.
Anything can happen, so it is necessary to keep up to 9 months of living expenses in your savings account. This should be your emergency fund to help avoid relying on credit cards with high-interest rates and other loans.
It is impossible to know when you may lose a job or have unexpected expenses pop up suddenly. Therefore, you should dedicate your life to maintaining an account just for emergencies.
4. Spend Within Your Means
If you scroll through your Instagram feed and notice that your favorite influencer has a new Ferrari or handbag, you should avoid buying the same.
Delayed gratification can help you retire successfully down the line. No matter how hard it is, you should ignore those pictures of celebrities partying in Mykonos because you have another goal that you must discipline yourself to fulfill.
5. Healthy Friction
Remember that financial planning does not mean that you need to cut away everything good in life. However, you should think twice about whether you can spare a vacation to put more money into a savings account for emergencies.
You should always have a healthy balance between living your life today and planning your future. The decisions you make now will impact how successful you will be later.
Always think twice before spending because the thing you want the most may suddenly not seem important right now. While you put off spending, you should organize your retirement funds even if you are young and still saving. Here is more information about how to stabilize your retirement funds.
6. Get Insurance
No one is bulletproof at any age. Even if you are young, you or a loved one may still need medical support in the event of the unthinkable. Therefore, you should consider investing in a term life policy. This will come in handy when you start a family.
7. Invest in Stocks
When the market is down, it is your chance to grab some stocks on sale. Remember to be patient instead of expecting immediate gains.
The best thing to do is buy shares for your favorite companies that you know have an excellent track record. There are also employer-sponsored retirement plans that take the guesswork out of buying stocks, making it easier for millennials to invest.
8. Grow Your Career
The best way to save for retirement is to earn as much money as possible. You should spend your youth aiming for raises and promotions to climb the professional ladder. Each time you do this, you will have more money in your wallet to put towards your retirement and emergency accounts.
9. Approach Thoughtfully
When we suddenly come into some money, we go a little crazy. For instance, if you have just paid off your car loan, you may free up cash flow. This can feel like having a safety net that can allow you to spend on other things.
However, you should be careful about getting into new debt. Think about using this extra cash for emergencies or your future instead of upgrading for VIP passes at Coachella.
10. Get Loved Ones Involved
When you are retirement planning, you will need some cheerleaders. The best thing to do is to get friends and family members involved. Tell them that you want to strictly save for retirement and ask for their support. You could get a friend to remind you how much to put away every month from your income.
Financial Planning Done Right
Now that you know how to plan for retirement in your 30s, you should already be creating that savings account. Always deposit money into your savings account consistently to ensure that you can expect a big payout when you are closer to the end of the rainbow.
If you struggle with saving, get some friends to motivate you. If you enjoyed reading this retirement planning guide, check out some of our other posts for more information.