Balanced retirement fund: Pay for your needs and emergencies freely
The closer you get to middle age, the more panic attacks you are likely to suffer, in case you can find that your retirement savings program is far from accomplishing the target. However, like most others, you too may think of contributing larger sum every month towards your retirement accounts to fulfill your goals.
However, such a knee-jerk reaction isn’t advisable at all since doing something beyond your affordability may have adverse implications. So, before deciding on whether or not to increase your monthly retirement contribution, just make sure that you’ve considered some very basic issues that directly relate to your nest egg.
Why is your savings fund still short of your projected target?
This may have happened due to various reasons like not saving as planned on a regular basis, using disposable income for unnecessary things and so on. If this is so, then you must stop all sorts of irresponsible spending behavior and make it a point to never budge from your budget.
However, if your leftover cash is used for basic household needs, then perhaps your retirement goals as well as budget is somewhat unrealistic and must be revised.
Will increasing the retirement savings amount be a good choice?
For you, it can be a good idea to add extra amount to your retirement fund. However, it should not translate into more credit card balances or other types of debts and a substantial drop in your disposable income. In that case, you can consult a debt relief attorney to help you manage your financial obligations.
If that happens, then increasing your contributions towards your retirement plans will, in reality, have negative effect on your overall savings.
Are you using your nest egg to pay for the emergencies?
If you are forced to withdraw funds from your retirement accounts to pay for sudden life events, then it is very likely that your emergency fund is insufficient. According to the financial experts, you should have at least three months worth of your net income as an emergency fund to cover unwarranted expenses.
So, just like your retirement savings, setting aside a certain amount as emergency fund every month is said to be another kind of recurring expense. As a result, it won’t pose as an added burden to you, if you see them as recurring costs.
Basically, to get and follow a potent savings program, one of the crucial elements for that purpose is to abide by a prudent monthly budget that is based on the principles of recurring costs. Your budget should not permit for retirement savings and daily living costs, rather it should factor in those amounts that needs to be allocated to an emergency account.
Finally, there is no doubt that savings for many like you is a herculean task. However, if you want to overcome your fears, then as already said, you’ll have to treat that as a recurring expense. You can simplify this process by increasing your disposable income either through a salary hike or by working extra hours.
written by Andy Masaki