How to Prepare for a Better Financial Future

While it can be difficult to plan for the future when there are so many expenses to consider that affect you now, it is something that is important. Especially considering that one day you will not be bringing in the income that you are today. Whether retirement is decades into the future or quickly approaching, you can take steps to improve your financial health that will set you up for the best possible financial circumstances as you age.

Based on the findings for the average retirement income in the U.S., the median income for households aged 55-59 is $74,645. While this is skewed by high earners, it still proves that you will need a substantial savings to support yourself when you’re no longer working. In order to do so, you will need to implement a strategy now to ensure that you are able to live comfortably.

  1. Start saving as soon as possible. 

If you are not making the income you want to be bringing in, it can be difficult to have the discipline to start saving—especially when you already have limited discretionary funds. However, putting money into your retirement savings account now is crucial, even if you can only put a small amount in. Once you start contributing to your savings, like a 401(k) account or IRA, the money will have the opportunity to begin accumulating interest. The longer your money is in there gaining interest, the larger it will grow.

Each time your income increases, you should be designating more of your funds to your savings. And, you can even set goals in between raises to slightly increase your retirement contributions so that your savings can grow faster.

  1. Make investments.

While a 401(k) is a good place to start, making other investments is a smart way to generate one or more streams of passive income. This could be a high-yield savings account, certificate of deposit (CD), or money market account. Like contributing to retirement, it may seem difficult to set aside even more money to dedicate to investments, but you will be thankful you did in the long run.

When you first start investing, begin with a set budget that you feel comfortable with. Don’t let your lack of knowledge prevent you from investing. Today there is plenty of free advice out there (some you should follow and some you should ignore). There are also several user-friendly apps that you can use to kickstart investments and savings. Another rule of thumb for investing is diversifying your portfolio. As the saying goes, you do not want to put all of your eggs in one basket—this goes for both your retirement account and other investments.

  1. Educate yourself and develop a plan.

Neglecting to face the financial reality of aging is a mistake that many people make when planning for their future. While you don’t need to have your entire life mapped out, you should consider your overarching financial and lifestyle goals as you age. Here are a few important questions to ask yourself when planning your financial future:

  • Is your career path going to allow you to earn the income you need?
  • Do you need to find additional avenues of income in order to save?
  • What are your priorities for retirement?
  • What luxuries are the most important to you?
  • How can you change your spending to put you in a better position to achieve these goals?
  • Above and beyond caring for yourself, what are additional expenses you might need to consider?

Once you have an idea of your goals, educate yourself about the options you have to achieve them. Make sure you’re aware of inflation rates and how they work, projected costs of living, how you can improve your savings, and other factors that will impact your financial well-being in the coming years. Living in the dark might make you feel less intimidated, but you’re actually doing yourself a disservice. Education is key to making smart financial decisions that will benefit you in the long run.

Whatever your financial goals are whether it be aging in place or moving to a foreign country, you will need money to pay for your most basic needs but also to maintain your quality of life. After all, your Golden Years open up plenty of time to enjoy the finer things in life, if you prepare properly. Starting with these tips, you should be on your way to a better financial future.