How to Effortlessly Prepare Your Finances for the Future

It turns out that the average American has very little saved for retirement – a miniscule $63,000.

This means that most Americans will depend on social security and part-time jobs well into old age. Rather than enjoying their Golden Years with travel and family, most of their time will be focused on affording life’s basic necessities.

This isn’t good. And it isn’t necessary. Retirement should be enjoyed, not endured.

Fortunately, a financially stable retirement doesn’t have to be difficult to come by. It just requires a little planning. By setting the right processes in motion, saving for retirement (and other expensive life events) can be an effortless endeavor.

If you’re ambitious about growing your wealth you can take deliberate steps to save money. However, you don’t have to be ridiculously frugal to save up a decent nest egg. Saving can be surprisingly easy – you just have to establish the right processes early on.

Consider the following five activities that can skyrocket the long-term value of your net worth and prepare you, and your family, for a bright future.

1. Maximize Your Employer 401(k) Match

For many of you who are financially savvy, maximizing your employer 401(k) match may seem like a no-brainer. But the truth is, I’ve known multiple people who have neglected to receive the matching funds from their employer because they wanted to use the money for something else.

Although many of these individuals neglect to earn their 401(k) match because a few extra dollars now is worth more than a healthy retirement portfolio, but this isn’t always the case.

One guy I knew had a noble desire – to pay off his student loans. He concluded that saving for retirement should wait until he was debt free. Although paying off debt should be a high priority, he was giving up $3,000 a year that his employer would give him for free if he simply deposited $3k into his 401(k). Once we did the math he realized that it would be better off to keep the loans around a little longer in order to gain his matching funds.

The first step to effortlessly saving for the future is to maximize your employer 401(k) matching contribution. Not only does this double what you save, but because the contribution is made directly out of your paycheck, the entire process is automatic.

2. Buy Your Home

If you living in a ridiculously overpriced community, or have a job that requires you to move every couple of years, then buying a home may not be right for you. However, for most Americans, owning a home is one of the best ways to save without requiring much additional effort.

First off, there are the obvious financial benefits of owning a home. Your monthly payments build equity, you receive tax benefits, and the first $500k in profit ($250k if single) from selling your home is free from capital gains tax.

Although these are all great reasons, the most obvious is that you develop wealth without having to think about it. Most retirement saving strategies require you to give up money elsewhere. This isn’t the case for home ownership. If you weren’t paying a mortgage, you would be paying rent.

When you own a home you make a monthly payment – just as you do when you rent. The only difference is that a portion of that payment ends up benefiting your future.

3. Automate Your Savings

For many people, seeing extra money in the bank inspires additional spending.

If this describes you, consider establishing an automatic monthly transfer from your bank into some sort of investing account – such as one of the many robo-advisor firms.

Not only does transferring money out of your bank and into a separate account prevent you from mentally thinking it’s available to spend, it also allows you to earn a decent return from these unused funds.

While opening an IRA will provide additional tax-saving benefits, sometimes you want to have money that you can access at anytime – and not exclusively during retirement. By directing funds into a regular investment account you can access this capital when needed – while still allowing it to grow over time.

4. Invest in Whole Life Insurance (Maybe)

As Chris has mentioned in the past, whole life insurance isn’t for everyone. In fact, most Americans are better off purchasing term life insurance and investing the difference.

However, if you are a high earner, whole life insurance has its benefits – and not just for you heirs. A whole life insurance plan can be borrowed against whenever needed and provides a tax-friendly way to distribute wealth to your children and grandchildren.

But most importantly, once you’ve purchased a life insurance plan, the payments become part of your routine. Suddenly, these savings for your family’s future require very little effort on your part – and offer a degree of safety that your family may not otherwise enjoy.

Although you shouldn’t go out and buy a whole life insurance plan as a strategy to save for retirement, it may be worthwhile to explore whether or not it would benefit your particular situation.

5. Start a Side Business

There are literally hundreds of ways to make money on the side. And the beauty of it is that you can make money doing something you love! What are your hobbies and passions? Odds are you can find a way to create a blog, store, or business to monetize those interests.

Meanwhile, it’s not unreasonable to earn anywhere from $20-100+ per hour as a part-time freelancer or consultant. Take the exact same skills that you use for your day job and offer them to small businesses in a consulting capacity and charge double or triple your hourly rate.

Whether you start a hobby shop, blog, or small consulting agency, it may not be long before you double your income by working a few extra hours in the evenings and on weekends.

Not only does a side business help you earn more money that can be saved for the future, it also has the potential to become incredible lucrative. You may wake up one day to realize that your fun blog has turned into a million dollar business.

The Secret to Retirement Saving is “Processes”

People who retire in the best financial position have developed processes throughout their lives that make saving and investing automatic.

Each one of us has a limited amount of willpower, brainpower, and time in a given day. The more of that energy a task requires, the less likely you are to accomplish it. Therefore, when you find ways to automate crucial activities (such as saving), the likelihood of succeeding becomes substantially higher.

So stop worrying about your finances and start planning. Schedule automatic deductions and transfers out of your bank, buy a home, and launch a side business. It won’t be long before you’ll start seeing a noticeable improvement in your financial health.

 

About the author: Rob Erich writes about the digital nomad lifestyle on MoneyNomad.com and discusses personal finance for InvestmentZen.com. When not working as a corporate trainer, Rob enjoys travel, writing, and meeting new people. You can reach out to him at any time on Twitter: @MoneyNomadRob.

Important Resources

  • Read my frequently asked questions or if you need personal 1 on 1 guidance from me on how to fully prepare as well as protect yourself from the misrepresentation please click here.
  • Every month I update this post here for my personal "Millionaire Challenge". I suggest you read the entire post and when you reach the bottom you can see my updated progress.
  • I highly recommend the Simple Path to Wealth book to grow Your wealth simply and steadily. It will educate you beyond your financial imagination. This is my review of the book.
  • If you are new to stock trading test your knowledge here with a basic stock market quiz.
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  • Do your best to avoid day trading distractions. Especially the 10 I list here.
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