If you’re in your mid-30s and find yourself staring at a retirement savings account that’s less than impressive, you’re not alone. The reality of balancing rent or mortgage payments, daily living expenses, and the impact of high inflation has left many feeling overwhelmed and unprepared for the future. It can seem impossible to save anything at the end of the month when prices are high, but there is hope. Let’s take a step-by-step approach to navigating this situation, so you can start building a more secure financial future.

Step 1: Take Stock of Your Current Financial Situation

The first thing you need to do is get a clear picture of where you stand financially. This can be uncomfortable, but it’s a necessary step in creating a plan that works. Start by listing all your income sources, regular expenses (like rent, utilities, groceries, insurance, etc.), and any debts you may have.

1. Income

• Salary/Wages: List your monthly take-home pay after taxes.

• Side Hustles: Include any additional income from part-time jobs or freelance work.

• Investments: Note any dividends, interest, or other passive income streams.

2. Expenses

• Housing: Include rent or mortgage payments, property taxes, and insurance.

• Utilities: Cover electricity, water, gas, and other essential services.

• Groceries: Track your monthly food expenses.

• Transportation: Include car payments, insurance, gas, or public transportation costs.

• Insurance: Don’t forget health, auto, life, and any other necessary insurance premiums.

• Debt Payments: Include credit cards, student loans, personal loans, and other recurring debt obligations.

3. Debts

• High-Interest Debt: Note any credit card balances or payday loans.

• Low-Interest Debt: Include student loans, mortgages, or other loans with relatively low interest rates.

With this information in hand, you can better understand where your money is going and identify areas where you might be able to cut back or reallocate resources.

Step 2: Prioritize High-Interest Debt

High-interest debt, especially from credit cards, can be a significant barrier to saving for retirement. The longer you carry a balance, the more interest accrues, making it harder to pay off the principal. Prioritizing debt repayment is crucial for freeing up money to save for your future.

Strategies for Debt Repayment

• The Snowball Method: Start by paying off the smallest balance first, then roll that payment into the next smallest debt.

• The Avalanche Method: Focus on paying off the debt with the highest interest rate first, then move on to the next highest.

Both methods are effective, so choose the one that aligns best with your financial personality and preferences.

Step 3: Start an Emergency Fund

Before aggressively saving for retirement, it’s vital to have an emergency fund in place. An emergency fund provides a financial cushion for unexpected expenses like medical emergencies, car repairs, or job loss. Without this buffer, you might find yourself dipping into your retirement savings or going into debt when life throws a curveball.

How Much Should You Save?

A good rule of thumb is to save three to six months’ worth of living expenses. If that seems daunting, start small with a goal of $1,000 and build from there.

Step 4: Reevaluate Your Spending Habits

When you’re struggling to save, every dollar counts. Now that you have a clear picture of your income and expenses, look for areas where you can cut back. Small changes can add up over time.

1. Groceries and Dining Out

• Meal Planning: Create a meal plan for the week and stick to a shopping list to avoid impulse buys.

• Cut Back on Eating Out: Limit dining out to special occasions and try cooking more meals at home.

2. Subscription Services

• Audit Subscriptions: Take a look at your recurring subscriptions (streaming services, gym memberships, apps) and cancel any that you don’t use regularly.

3. Transportation

• Carpooling or Public Transit: If possible, consider carpooling or using public transportation to save on gas and reduce wear and tear on your vehicle.

Step 5: Increase Your Income

When cutting expenses isn’t enough, consider finding ways to boost your income. This might involve taking on a side hustle, asking for a raise, or pursuing further education or training to qualify for higher-paying jobs.

Side Hustles to Consider

• Freelancing: Offer your skills in writing, graphic design, web development, or another area on freelance platforms.

• Part-Time Work: Look for part-time work in your community that fits around your full-time job.

• Gig Economy: Consider driving for a rideshare company, delivering groceries, or other gig economy jobs.

Step 6: Start Saving for Retirement

Even if your retirement savings are currently lacking, it’s never too late to start. The key is to start small and be consistent.

1. Take Advantage of Employer-Sponsored Retirement Plans

If your employer offers a 401(k) or similar retirement plan, take advantage of it, especially if they offer matching contributions. Contribute at least enough to get the full match—it’s essentially free money.

2. Open an Individual Retirement Account (IRA)

If you don’t have access to an employer-sponsored plan, consider opening an IRA. There are two main types:

• Traditional IRA: Contributions may be tax-deductible, and earnings grow tax-deferred until you withdraw them in retirement.

• Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.

3. Automate Your Savings

Set up automatic transfers from your checking account to your retirement account to make saving easier. Even if you start with just $50 a month, it’s better than nothing and will grow over time.

Step 7: Adjust Your Retirement Expectations

It’s important to be realistic about your retirement goals given your current situation. You may need to adjust your expectations, such as delaying retirement by a few years or living on a more modest budget during retirement.

Consider the Following:

• Working Longer: Delaying retirement allows more time for your savings to grow and reduces the number of years you’ll need to rely on them.

• Downsizing: Consider moving to a smaller home or a less expensive area to reduce living expenses.

• Social Security Timing: Understand the impact of when you start taking Social Security benefits. Delaying benefits can significantly increase the amount you receive each month.

Step 8: Protect Yourself with Insurance

Insurance is an often-overlooked component of financial planning, but it’s essential for protecting your assets and your loved ones.

Types of Insurance to Consider

• Life Insurance: Protects your family financially in the event of your death. Term life insurance is typically the most affordable option.

• Disability Insurance: Provides income if you’re unable to work due to illness or injury.

• Long-Term Care Insurance: Covers the cost of long-term care services, which can be a significant financial burden in retirement.

Step 9: Seek Professional Advice

If all of this feels overwhelming, it might be time to seek professional financial advice. A certified professional Retirement Planning Adviser like myself can help you create a personalized plan that addresses your unique needs and goals. We can help you navigate the complexities of retirement planning, debt management, and more.

Start Today for a Better Tomorrow!

While the road to retirement might seem steep and full of obstacles, it’s never too late to start planning and saving. By taking small, consistent steps, you can build a more secure financial future. Remember, the most important thing is to start now. Every dollar you save today is a dollar that can work for you tomorrow.

As your Safe Money Lady™, I’m here to help guide you through this journey. Whether it’s managing debt, building an emergency fund, or creating a retirement plan, I’m committed to helping you achieve financial peace of mind. Together, we can turn your retirement dreams into a reality.

Warm regards,

Sharon, Your Safe Money Lady™
Licensed Mortgage Broker, Certified Professional Retirement Planning Adviser, and Financial Advocate

Protecting Your Nest Egg, Inc.

NMLS #2308601