The good news is that you don’t need a huge salary to build wealth and retire. And you can do it even if you are worried about your finances because the country is officially in recession.
There are only three steps to take, and anyone can take them – even in turbulent times and on a modest income.
1. Prioritize investment when establishing your budget
With only so much money to spend, there is a good chance that investment in retirement will fall apart if it is not a budgetary priority. Rather than spending first on other things and then trying to invest what is left, treat retirement investment as an essential bill that you have to pay each month.
You need to have a clear retirement savings goal, how much you need to invest to reach it, and the budget each month before you allocate money to discretionary spending. If you do, you are almost guaranteed to retire with the nest to be a wealthy retiree.
2. Automate your investments
It takes a lot of willpower each month to withdraw money from your checking account (where it is spendable) in your investment accounts. Instead of forcing yourself to make this responsible choice all the time, automate your investment.
Once you’ve budgeted for a specific amount of retirement savings each month, sign up for automatic contributions 401 (k) to have the money withdrawn from your paycheck before you receive it. If you don’t have a work plan, you can also set up automated money transfers through your bank or brokerage firm where you have your IRA.
Automated investing means that you save enough for a secure retirement without any effort and that you never miss a contribution since the money is gone before you have the choice to do anything else with it.
3. Invest wisely
Putting your money in a retirement savings account is half the battle; investing wisely is the other half.
First, you need an age-appropriate asset allocation. Young people should have a larger percentage of their equity portfolio because they have more time to wait for market downturns. To find out how much of your money should be in the market, subtract your age from 110 and invest that percentage of your assets in stocks.
You must also choose the right equities, which means a diversified portfolio of solid investments. If you don’t want to take the time to really find out about the companies you invest in, index funds are your best approach. But if you’re interested in investing and ready to work, you may be able to do better by buying stocks from strong companies.
Start taking these steps today
The sooner you take these three steps, the more likely it is that you will reach your wealthy retirement goal. Rework your budget today, find the money to invest, put your money on the market and you’re on the right track to financial success.