By Sharon Arrey, MBA Finance and Accounting
Money is essential for living, and budgeting is crucial to effective financial planning. There are several different reasons for budgeting; it could be to increase your savings for things such as college tuition, to gain control of your financial future, or to cover monthly bills and track spending. Budgeting and saving help prepare for major purchases, the unexpected surprises in life and why not for those years when all we plan to do is enjoy life – old age.
It is important to set financial goals and even more imperative that you track these goals. To effectively plan a savings budget, it’s important to decide on short, medium or long term goals. In this article we will focus on long term savings goals for retirement.
There are many ways of spending your money but there are also just as many ways to save it.
Set a budget
Planning for retirement is one of the most important life accomplishments from a personal and financial perspective. Before committing to a retirement savings, it is important to create a budget. Setting a budget will keep you aware of the flow of money in and out of your accounts. You can find free user-friendly tools like www.mint.com, which will track your spending and help you set realistic budgetary goals. While everyone would love to retire comfortably, making it possible to do so requires focused action. It is important to set up an investment plan based on your goals and individual needs.
Do you plan on retiring well? Now is the time to find out how much you should be saving to reach your goal. Keep in mind the lifestyle you would like to have when you retire, where you will be living, and if you plan on having a job during your retirement years. These are key factors that determine how much you save now, along with how long you plan to, given your current income situation.
Once you have set up a savings budget that is right for you, it becomes easier to execute your plan for a great retirement. Here are some ways to start growing your retirement fund:
– The 401k is one of the most popular retirement plans mainly due to the fact that employers will match employee’s contribution. This is however not the best for a self-employed individual. 401k has a wider variety of investment choices available like stocks, bonds and mutual funds. With the 401k, funds are not readily accessible.
– The IRA is a popular retirement plan and can be set up by individuals as well as those who are self-employed. These contributions are generally tax deductible. A traditional IRA is like a personal savings with a higher yield and has tax advantages when used for saving money toward retirement.