Super small steps that can lead you to financial success
What does financial success mean? It does not necessarily mean going all in and contributing 15 percent to retirement accounts plus thousands of dollars into savings each month. Realistically, most people can’t afford to make those larger contributions. Small actions can lead to big results. Believe it or not, simply raising your retirement contribution each year by just 1 percent can make a big difference when it comes to your financial success.
For example, according to Fidelity, if a 35-year-old who earns $60,000 per year increases contributions by just 1 percent, which is less than $12 per week, an additional $85,000 or more would be saved by retirement. This assumes retirement at 67 with an average growth rate of 5.5 percent and a salary growth rate of 4 percent.
For those who make larger salary leaps and delay retirement, this number would just increase. Compounding interest can make a difference the longer it has to work for you and your account balances. Here are some steps to take to ensure that you maximize your long-term savings opportunities without feeling like you’re compromising your lifestyle.
Start to save as early as possible.
Longevity is helpful in retirement planning, so making the most of compounding interest means that starting to save early is important. Even small contributions early in life can help secure financial freedom later in life. Remember, few people reach their goals overnight or over a short period of time.
Take advantage of an employer match.
Many employers offer a matching percentage on contributions made to retirement plans, such as 3 percent or even more. Depending on this amount and your salary, your employer could be putting hundreds or even thousands more in your 401k every year. Always take advantage of free money offered by your employer.
Activate the annual automatic contribution increase.
Most retirement plans have an option to automatically increase contributions by 1 percent every year. Many people turn this feature off, as they want control to manually adjust any increases. But the years can go by with the same 3 percent contribution before you know it. Make sure to opt into the automatic increase and also increase your contributions another percent when life changes happen, like marriage and childbirth.
You likely won’t notice the difference in your paycheck when you start with increasing your 401k contributions by just 1 percent. Also, you can apply the 1 percent increase to other areas of your life, such as your credit card payments and mortgage payment. Making small and incremental changes can help you pay things off and save for retirement faster and can help you stick to your goals.
If you have questions about how to reach your goals with a customized financial plan or if you would like your current financial plan reviewed, schedule an appointment on Bayntree’s online calendar by selecting the date and time that is most convenient for you! You can also always reach us by emailing email@example.com.
Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.