While it could be argued that any savings are good savings, having a defined strategy could save you hundreds of thousands of dollars in your 401(k) plan.
Think of it like exercise. Those who are sedentary during the week and then go "all out" on the weekends tend to have more injuries and less progress than those who have consistent, sustainable habits woven into their daily lives.
Similarly, occasional attempts at saving; driven by energy and passion, may be easier in the short run, but produce a less desirable result in the long run.
Needless to say, there is a method to the madness.
In my last blog post, I wrote about the importance of delaying gratification and starting to save early. If you are like me and have yet to kick start your savings; or if you want to evaluate your savings process, here are 6 things that you can do to become more deliberate in your retirement savings.
1. Create a SMART Financial Plan
Determine how much you want to have saved for retirement, and then create a plan to reach it. Remember the SMART goals model (Specific, Measurable, Achievable, Relevant, Time bound) as explained by Mind Tools.
If you are having trouble visualizing what your plan should look like, ABG Mobile (the ABGRM mobile application) offers a free tool called the 401(k) Calculator which allows employees to input their information and their employer's matching information to predict their 401(k) balance upon retirement.
2. Open Communication with Your Employer
Do you consider yourself to be "401(k) literate"?
If the answer is no, consider asking your employer about your retirement plan. Learn about additional resources that your plan might include.
Financial Wellness is a "hot topic" that has been shifting how the retirement space supports plan participants. Lawrence Solomon describes financial wellness as "…a comprehensive collection of tools and education provided to the employees in the workplace. The tools can be varied, but include at a minimum: an assessment tool, education, calculators, videos and articles."
ABGRM offers MyRetirement, a state of the art financial wellness tool that takes all your income, assets, & expenses - and gives you a snapshot of your life in retirement. Log into your account today and run the numbers to see where you can make improvements to your financial plan.
Don't be afraid to ask questions to really understand your savings.
3. Take Advantage of the Employer Match Option
Plan participants often fail to take advantage of the employer match option.
"So many people give up "free money" when they don't save enough to take advantage of their employer match."
- Shawn Oram, president of ABGRM.
Talk with your employer to see if this feature is available with your plan.
4. Avoid Recurring Charges
"Sign up for [blank] now at this discounted monthly rate!" This increasingly popular business model may seem harmless; however, $5-10 a month adds up fast for a service that you might be able to receive for less elsewhere.
Write a list of the services that you subscribe to each year. How much do you spend annually on these services? You might be surprised when you see how much money these "small monthly fees" are draining from your pockets.
If the service is one that you actively use, research to see if there is a more affordable option. Many people find that they can save hundreds of dollars on cable if they replace it with an internet and streaming service.
Consider reinvesting the money that you have saved into your retirement plan or an ABG Advantage IRA.
5. Structure Your Habits for Success
Eating out, picking up a pack of gum, or seeing a movie versus staying at home. All of these decisions can take less than a minute; however, the financial implications can be astounding.
Let me give you an example:
A 32 ounce (size large) dirty doctor pepper from my local Sonic Drive-In costs $2.78. If I bought one every day to jumpstart my morning, it would cost me $1,014.7 annually.
A medium drink costs $2.46. If I were to downsize my daily drink to a medium, I would now spend $897.9 yearly and save $116.80 per year.
Similar to the recurring charges exercise discussed above, this is an easy way to visualize where your money is going so that you can be in control and put your money where it counts.
6. Avoid Debt
As NerdWallet explains, debt isn't necessarily a bad thing. It's all about your priorities.
Exercise caution when taking out loans. You might ask yourself if you can get by without purchasing [blank].
You might also consider how this will impact your retirement goals.
Every dollar held on loan will need to be paid back with interest. Do you want your money to work for you, or do you want to work for your money?
Taking control of your retirement situation can seem intimidating at first; however, every positive change is a step in the right direction.
A few questions upfront and consistent habits can make sure that you arrive at retirement financially fit.
Ask your employer or financial advisor how you can improve the quality of your retirement savings today!