The trick to a happy retirement is to start saving early.

  

   This is a repost from last year because I feel the math could be repeated. The excuses I hear for not starting savings are comical: I need to pay off my credit cards first, I'll wait until I get married, I have student loans to pay off, and my all-time favorite, I'll wait until I have more money. Don't make excuses. You need to plan for retirement as early as possible. Consider the following information on what you need to save (based on starting age) to have a million by age 65. For simplicity, I assume an 8% return.                             

                                                                                                                

Age 20 $200 mo.

Age 30 $450 mo.

Age 40 $1055 mo.

Age 50 $2850 mo.

   The cost of waiting is just too high! Einstein once said, “Compound interest is the eighth wonder of the world". You can see in the above table we only get that 30 or 40 years of compounding once. Don't just make the assumption that a million is enough either. Inflation of 3% a year will cut the dollars purchasing power in half over 25 years. My twenty and thirty something’s' readers should consider a much higher savings goal. In other words 25 years from now you guys will need two million to have the purchasing power one million has today. SAVE! SAVE! SAVE! Finwiz.

Are your retirement savings enough?

   Securing a retirement is the reason most of us start to save in the first place. Ultimately, the quality of our life in retirement is going to depend on how much we've saved beforehand. Google searches show that only about half of Americans have retirement savings. This is a huge mistake that can't be undone at the last minute. Savings accounts need to be started early because they need to grow over time. Most of us would like to know how much we'll need to save for our own retirement. The Internet is a great source to start these calculations. Find a good retirement calculator and start to play around with different monthly savings numbers. Consider seeking a professional money manager to discuss your goals and individual situation. The whole retirement process depends on our individual situations, and how we manage our income sources today. Finwiz.

We need to stop kidding ourselves about finances and reality

 There is a list below that contains subjects in personal finance. We all need to be aware of what these are and study them over time. If we don't learn about these subjects and take responsibility for them, no one will. Picking a subject to study monthly is a good start. The more time that passes without taking this responsibility, the more time we're kidding ourselves about what our financial futures will look like. Finwiz.

1. What are our sources of income, budgets?

2. What's our total net worth?

3. Emergency funding.

4. Credit scores.

5. Insurance.

6. How much debt?

7. Estate planning.

8. Portfolio funding options.

Savings doesn't just happen, it has to be a goal or hobby

    We aren't going to just wake up rich someday, unless we win the lottery or inherit a large sum. If that's your retirement plan, please find a different blog to follow. Spending less than we earn and investing those funds over a long period of time is the only way to achieve financial security. Our individual income levels don't have much to do with success either. Many people with below average incomes save and retire early. I've known others that earned high six figure salaries and still accumulated debt because they never made saving a goal or hobby. When the time for retirement comes, only those that have had a long term plan in place, to spend less than they earned, will be ready.

Take financial inventory at least once year

    The new year is a good time to take financial inventory and review where we are in our personal finance plans and goals. Reviewing our current household budget and looking for more saving opportunities would be first on my list. I think it's a good idea to list assets and liabilities and figure our net worth every January. This gives us a baseline to compare to the following year. We can also use this list to make sure we are reducing liabilities and debts and increasing assets and savings.

Four ways to increase your net worth

1. Reduce high utility bills

    Adding insulation to the attic will save on utility bills in both summer and winter. A programmable thermostat has saved me a bunch over the last twenty years. Lower it at night and warm up with an extra blanket.

2. Use all the money saving perks our employer offers

    Make sure you know the benefits your employer offers and take advantage of them.
Many of us sign up for healthcare only. Many other options like flexible spending, life insurance, dental, 401K, and eye care could be available. Deductions for these are usually pretax adding to their benefit.

3. Do it on our own (DIY) when possible

    The Internet has the answer to almost any question you have about home and car repairs. I've been able to save on basic wiring and bath repairs. I even found the directions to program my car's keyless remote entry when a dealer wanted to charge $45. Try to DIY when possible, there's a lot of satisfaction in being self-reliant.

4. Keep our credit scores in order

    Make the commitment to pay all bills on time or a little ahead of time when possible. We can check our credit report for free once a year at www.annualcreditreport.com. Checking for mistakes and knowing what's in our reports should be an annual exercise. See you next time Finwiz.

Three things we can do to improve our finances

1. Make sure insurance coverage is up to date.

    It's a good idea to do an annual review of all insurance coverage. Knowing what our deductibles are and having the coverage we want will reduce stress if something happens.

2. If we are in debt,  cut up the credit cards and stop borrowing.

    This is one of the easiest ways to get out of debt, pay cash. It's just too easy to charge on credi. Don't get credit cards until they are used for convenience only. That means the bill can be paid in full every month.

3. Open a tax deferred account now.

    Open a 401k at work as soon as you're eligible. If it's not available to you, open a traditional IRA and make the commitment to start funding it yourself every payday. I can't repeat the importance of these tax deferred accounts enough. Finwiz.

More savings tips to start the new year

 1. Stick to one phone line.

   

     Reduce expenses by going to either a cell phone or home phone don't pay for both. Recurring monthly expenses should be reduced when possible. Cable, cell, and Internet services will increase their rates little by little over time hoping we won't notice. Don't play their game.

2. Buy ebooks or use the library

    Ebooks sell for around half price of printed books. We can check them out at most libraries also. This adds up to huge savings over time for readers.

3. Consider increasing insurance deductibles.

    Review insurance coverage at least every two years. Auto and home owner premiums can creep up over time. Increase deductibles or consider eliminating collision coverage on older cars. Collision coverage doesn't make since on a car valued at $3000 when the collision premium is $150. Finwiz.

Have a healthy financial plan for 2012

 1.  Ignore that raise or year end bonus.

    We've talked about this before. Pretend you never got a pay increase and save it instead. Never seeing a decrease in take home pay makes this one of the easiest ways to add to savings over time.

2. Consider automatic transfers to a savings account.

    By never having the money in our hands we are never tempted to spend the money. I've done this for my Roth IRA with only $50 a month, and I don't even notice it's gone. Over a year or ten years it still adds up.

3. Review our current budget with an eye on expenses. 

     The beginning of the year is a good time to refresh our family budget or plan a new one. Keep an eye on where we spend the most. Finding ways to cut expenses is going to be the fastest way to wealth creation. Have a great year, Finwiz.