If you’re nearing retirement, you know already whether you’re in sound financial shape. But if retirement is still several years or even a few decades away, you still have time to get yourself into sound financial shape if you aren’t already. Here are a few things that many retirees wish they could have done better.
Live Below Your Means
It’s too easy in our society to want to keep up with the Joneses. If the family next door has a new car every three years and goes on several vacations each year, it’s tempting to do the same. That’s particularly true if you can afford it in the present. But the money that you spend today is money that can’t be saved up to provide you with a better future in retirement. Looking back on your earlier years, are all those fancy vacations and new cars really worth it, or could you have done without?
There’s always something pressing that you think you need, so you buy it rather than put your money towards retirement savings. You may intend to start saving, but there’s always that little thing that you “need” that you think is more important in the moment. And before you know it, that money you intended to sock away is gone.
If retirement is still decades away, you may think you have plenty of time to prepare for it. But that’s not really the case. The earlier you start saving, the more money you’ll have available come retirement, thanks to compounding interest.
Too many people are interested in get rich quick schemes, putting their money into penny stocks, or day trading, or real estate. Or they may pile all their money into FANG stocks, in which case they’re susceptible to Dotcom 2.0.
Don’t squander your money on foolish investments. Stick to the basics, diversify your portfolio, minimize your investment costs, and don’t focus solely on returns. Investing is a marathon, not a sprint.
Prepare for the Unexpected
Make sure that you’re prepared for unexpected expenses such as medical care or car expenses. Diversifying your portfolio to reduce your risk exposure can also help you weather the inevitable stock market crash or two that will take place over the course of your career. You may also not be able to work as long as you had hoped, which will make it even more important to start saving early and save up more money that you think you’ll need.