The younger you are the farther away retirement seems. Also, the younger you are the better the chances of being ready when that time finally arrives! Whether you are getting close or not, here are a few things you can do to ease your mind that you will be ready for retirement when it is finally here.
Your Budget is in Check - One of the best ways to get ready for retirement is to establish a budget now and learn how to live within it's boundaries. Knowing what you spend and where is important to know and a good way to keep your spending in balance when you are on a limited income. If you have less debt than a year ago and only modestly tapped into your savings for spending, you are doing well. The test after the first year of retirement is if you are able to live comfortably living off a pension and Social Security with spending less than 4 percent of your investments, then you are pretty well set.
You Have an Emergency Fund - Establish an emergency fund NOW. Three to six months of living expenses saved is a good way to ward off issues if you find yourself suddenly out of work and it's also good to have a healthy emergency fund during retirement for things that come up unexpectedly.
Debts are Disappearing - Another way to be retirement ready is to get out of debt! As you pay off a debt, "snowball" that money into the next debt and so on until you have them gone. The less debt you have in retirement, the more money you have a month to live on.
Planned Uses for Extra Cash - Plan ahead for moments you get extra cash. Stimulus checks, tax refunds, bonuses, dividends and interest money all need a place to go so that they can work for you. Using it to increase your savings, pay down your debts or add to an emergency fund are all choices that will not just benefit you for right now, but for the future as well.
Annual Financial Check Up - Once a year take a look at your overall financial picture.
If you have lived according to your budget and it has increased your overall saving and decreased your overall debt, then you are doing well. It may be time to get some good financial advice from a professional now on investing too.
Cash Communication - Above all, talk about all your financial decisions with your partner, a close friend or financial mentor to see how you are doing. Even if they aren't a financial whiz, discussing your financial choices helps to improve your decision making as well.
One other thing to help ease your mind. How did you do in March of 2020? Were you able to keep financially afloat despite all the job changes and issues that were around? Did you save stimulus checks that you received or did you spend on all sorts of crazy stuff while you were quarantined? When you look back on your life when it has been in crisis mode, how well have you come out on the other side? That is a good test to see how you can handle situations in your future!