Money can’t buy everything, but it can help you live a comfortable life. Many people out there haven’t started their savings yet, and they’ve reached their thirties. Much like many things in life, savings will only be good once you’ve started it early on. It’s never too late to save, but why should you save money?
Average Savings for Retirement
You’d want to build your savings for one primary reason: retirement. Sure, we might want to have good savings for the next vacation we have planned, but all of us are planning for retirement one way or another. It’s the endpoint of our career, and for some, retirement is the main reason they have a career. So before anything else, it’s time we answer what the average funds required to retire are?
There isn’t a fixed average for retirement savings. But essentially, you’d want to have 80% of your pre-retirement income annually, to live comfortably once you retire. So if you’re earning $100,000 right now, you need to have $80,000 of that saved up and ready for the coming years of retirement. However, this is just a rough estimate. If you live conservatively and only withdraw 4% of your retirement savings every year, you should have more than enough for yourself.
The best way to figure out the average savings for your retirement is to calculate your average every year’s spending. That should be close enough to how much you’ll spend once you’ve retired, and you should make that your benchmark for your savings.
You might be surprised how much you’re going to need to retire comfortably. However, through some essential strategies, you should save that amount of money in no time. Here’s how you can build up your savings.
Building Up Your Savings
Stick to a Budget
The very first thing you should consider is your annual budget. Figuring out your yearly budget takes a rough estimation of your expenditures throughout the year. This includes the necessities such as food and utility bills. A good benchmark is the average spending of a household in the US.
It’s estimated that an American household spends on average $63,784 annually. A breakdown of their costs can be found here. If you’re single, there’s a good chance that you spend well below this average, which is good, but there’s a good chance that you’re earning less than the typical American household.
Experts suggest following the 30-40 rule to align your costs with your budget. Thirty percent is how much you should be spending on your necessities, 40% should go into your savings, and whatever remains to go into your hobbies and to travel. It’s a pretty aggressive way to save, but it’s a reasonable budget limit for anyone out there.
Sell Unwanted Assets
People develop a mountain of unwanted assets over time. They start stockpiling these assets in their attic or garage without knowing about it. These assets depreciate, and the longer they stay on storage, the longer you’re losing money. It’s time to sell these unwanted assets to build up your savings. The earlier you sell them, the more you have space in your home and more money in your bank account.
Refinance Your Mortgage
Next in line is to refinance your mortgage if you have one. The interest rate on your home loan can be deducted the moment you’ve paid for more than half of it because this gives you access to refinancing. Essentially, refinancing is all about paying your previous debt so you can get a new one. It’s an attractive way to reduce your mortgage’s interest rates and even reduce the period you have to pay for it.
You can then get a part of your home’s equity to start a business or maybe put it into some of your investments. It’s a great way to build your savings for retirement.
Stop Using Your Credit Card
Lastly, you have to start limiting your credit card use. Americans are $6,000 in debt because of their credit card. This is a lot of money that you have to pay off if you use your credit card often. This severely hinders your budget. It also delays your savings.
We all know that credit cards play a fundamental role in banking. It gives you access to a credit score, which is useful for business loans and mortgages. However, once you’ve built your credit score, it’s time to stop using it entirely. Pay with cash whenever you can, and don’t ever go into debt with credit cards because interest rates are much higher with them.
So there you have it, simple strategies you can do to build your savings. These strategies are fundamental to your future, so get on saving!
