The key is to get started. That’s really the key, to put some money away, put some money aside on a regular basis. And as time goes on, increase that amount.
There’s always the debate when we’re working with somebody who has debt and has discretionary income or extra income, should they take that extra income and really get rid of the debt or should they take that extra income and save it for longer-term. There are pros and cons to both and depending on the type of debt and the interest rate on the debt, sometimes it makes more sense to pay it down, sometimes it makes more sense to just save for the long term but I can tell you this, that from a feeling good or from a sense of feeling in control, putting money away and saving money, even though the number might be a really big number that you’re trying to accomplish getting started and making headway towards that at the end of the year when you look at how much you’ve made, from employment, and you say, where’d the money go at least to be able to point to somewhere that you actually were able to capture some of those dollars.
Because if you think about it, the money comes into your household, it gets spent, and then hopefully there’s some money left over. Well, if you could shift that and say as the money’s coming in if we could capture some of it off the top, and then what’s left gets spent, it’s a different way of thinking and it allows you to have that sense of control that you are putting something away for tomorrow and then as you go through the life cycles and you’re getting closer to retirement where perhaps some of the early goals that you had or handled, whether it was buying a house or educating the children or whatever you needed to get handled early on, and now the focus really shifts to where you’re more in that red zone.
The red zone is what I consider the last 15 or 20 years before your target date for retirement. So, say you’re 46 and you want to retire at 66 or you’re 58 and you want to retire at 70, whatever that red zone is where a lot of those early goals are handled. That’s where you can really start putting away some money for two reasons. Number one, the early goals are handled and you don’t have those obligations, hopefully. And then secondly, you’re in your higher-earning years usually during that time and you have that extra discretionary money to put away. So it’s almost like a period of catch-up to say okay I started when I was younger I was putting away a baseline amount it didn’t feel like a lot, but at least I’ve accumulated something. And then when you get in that red zone, to be able to start putting away really large sums of money over a period of years, to kind of catch up.
It’s always better to start earlier because of the compounding effect of money over time. So the sooner you get started the better. That hundred dollars you’re putting away now can add up to a lot more if it has 40 years or 30 years to grow, but it’s never never too late and it really gets down to looking at the money that’s coming in and the money that’s going out. Yes, the budget word, they’re looking at where, where’s the household budget where’s the expenses. What money could be set aside without really impacting your lifestyle that significantly? Still being able to do the things you want to do, but knowing that some of that money you’re earning is being put away for the future.
That’s the key. Every time we’ve gone through that process with someone, the one thing that everybody says is that I wish I would have done this sooner. I wish I would have gotten started sooner.