Six Steps for Building a Better Nest Egg
Six Steps for Building a Better Nest Egg
Building a nest egg takes planning, hard work, diligence, and time. And according to the investment research company Morningstar, only about 25 percent of working American households are on track for retirement. It goes without saying that in order to build a nest egg, you have to save money, but what specific actions should you take to prepare to live comfortably in retirement?
- Pay off debt
- Boost your Savings
- Compound Growth is Key
- Plan Your Life to Match Your Financial Goals
- Practice Patience
- Baby Steps and Discipline
Start by paying off debt and establishing an emergency fund of three to six months of expenses. Once this is in place, you won’t need to take from your retirement savings to pay for unexpected costs that pop up in life.
Increase contribution rates to your 401(k) and other retirement plans by one percent of your income every year. The goal should be to invest 15 percent of your annual income. If you invest up to the company match in your 401(k), invest in a Roth IRA.
When it comes to saving, time equals money. And it’s never too soon to start investing. The earlier you start, the longer your money has to grow. This concept of giving your investments more time to grow is called “compound growth”, and it’s a tried-and-true method for building a sizeable nest egg.
In other words, adjust your standard of living. If you make a financial plan and then live your life according to that plan, you’re going to be far better off in the long run than if you build a life and then try to work a financial plan around your comfortable standard of living. A good place to start is by examining your budget and expenses in detail. For example, how many unused memberships and subscriptions can you eliminate?
Investing isn’t a smooth path to wealth. Expect some bumps along the way. During a typical working career, an investor can expect to experience eight to 12 poor market years.
You can’t go from couch potato to running a marathon in one day, so you shouldn’t expect such a dramatic shift in your financial portfolio either. Achieve financial security and prepare for retirement by taking small actionable steps and practicing discipline when it comes to saving.
About the Author
Subscribe to Our Newsletter
Related Articles
Small Businesses Can Keep Finances on Track by Avoiding These Common Financial Missteps
Effective financial management is crucial for the success of small businesses, but there are numerous pitfalls that can impede growth. Read on as we delve into integral strategies to help small businesses avoid common financial mistakes and maintain financial...
Proven Strategies to Maximize Your Social Security Benefits
Navigating the complexities of Social Security benefits becomes increasingly important for effective financial planning as you approach retirement. By strategizing thoughtfully and making informed decisions, you can optimize your Social Security payments, helping to...
When Will the Federal Reserve Cut Interest Rates?
After experiencing two years of increases in interest rates, which led to significant spikes in mortgage and credit card rates, investors and consumers alike are eager to know when the Federal Reserve intends to reduce interest rates. Simply put, the Fed is waiting...