Lack of pension savings quickly turns into a crisis in the country. One in three Americans has less than $ 5,000 saved for retirement, and one in five has no savings, according to a Northwestern Mutual study.
If you are in this group, you should consider increasing your pension savings, but there are a few other things that really have to be prone to the first.
1. Set up an Emergency Fund
Nothing detracts from your financial resources as an emergency. If you do not have any savings, you may need to borrow or charge for your credit card, which you can not pay at the end of the month. Once you get into this debt cycle, it may be difficult to get out, and the money you would otherwise save should go for interest on your debts.
You can avoid this by proactively saving these unexpected events in an emergency fund Open a separate account or save the money in your existing savings account. make sure to take care of your emergency savings
You have to have a minimum of three months of life, but six months is even better, if you want, you can save for retirement and emergency fund at the same time. After you reach your goal, you can you are joining more than your extra money to retire every month.
2. Pay Debt With High Interests
There is a debate about whether it is best to pay high interest debt before saving for retirement, or whether you have to you do both at the same time This is not an easy decision The longer you take to repay debt on a credit card the more you pay interest This is a guaranteed loss and depending on how much you owe and what is your credit card rate, it can amount to thousands of dollars. But by delaying pension savings to pay off debt, you miss months or even years when that money could grow, and when the time comes for you to retire, you will have less egg nest to show it.
The right way to deal with this dilemma depends on your situation. If your employer offers a 401
If your employer does not offer 401 (k) or does not meet your contributions, this is a little more complicated. If you only have a small amount of debt with a high interest rate, you might want to throw away all your extra cash in one or two months to discard it. Then you can dedicate all this money to savings once your debts are paid out.
But if you have a very high interest rate, consider paying for it and saving for retirement at the same time. You can split your money evenly between the two or the service that is higher priority for you.
You may need to make some lifestyle changes to free up extra money, such as traveling and eating less, or picking up side-effects. If you struggle to find a plan to work for you, consider consulting with a financial consultant who can give you personalized advice. They may be able to invent a plan that you have not thought of.