The 3 Poor Savings Habit:

People are not achieving their retirement goals mainly because of the following poor savings habit:
1. Not saving early.

Often enough, young people do not realize or do not even think about retirement. They think that it is too far in ahead and they do not need to worry about it yet so they procrastinate in saving. However, a lot of people did not know that waiting for even just 1 year to save means of lot of money during retirement time.

2. Not saving enough.

You may have a diversified portfolio, but if you are not saving enough, you may not have enough balance to reach your retirement goal. For example if your retirement goal is $1,000,000 in 30 years, then saving just $500 a month at a hypothetical 7% average rate of return will not cut it. You have to either save $320 more and retire in 30 years or maintain the $500 per month savings rate and work seven years longer.

3. Not saving at all.

It is really tough to save money for retirement when you have a lot of current expenses that you have to attend to. So saving for retirement is probably at the tail end of your budget

Tips on how to overcome poor saving habits

Below are the five things that you can do to take charge of your retirement savings plan and defeat the three poor saving habits:

1. Educate Yourself.

Most of us are guilty of the poor working habits stated above and mostly are due to our financial background; lack of knowledge on how money really works.  Although some universities and even high school are offering personal finance classes, it is only available as an elective and not mandatory. Thus, it can be easily neglected. This may not be disastrous for your career but it may be disastrous to your financial well-being. That is why you need to educate yourself. As the old adage said, knowledge is power and in this case knowledge is money!!

2.  Don’t Wait – Start Now

The best time to start is now. When you are young, it is very easy not to think about retirement especially if it is 30 years away. Because of this, a lot of young individuals procrastinate when saving for retirement. Others may have to attend other obligations first or may not be able to afford contributing any amount. But the biggest question is can you afford to wait?

Do you realize how much it would cost you if you wait? Did you know that Time is Money? Please read the two articles about the cost of waiting:

• Retirement Planning: The cost of waiting one year when saving for retirement
• The Cost of Postponing Saving for Retirement on various years and rate of return

3. Pay your self first

If you have a hard time trying to squeeze retirement savings in your budget, the best way to do it is to use the method known as “Paying Yourself First.” As the phrase indicated, you need to prioritize retirement first and you can do this by deducting the savings directly from your pay check and then creating a budget out of the net income. In this way, you are guaranteed to save first. When you are using the retirement plans at work, chances are the retirement savings are already taken off your paycheck directly so you don’t even have to worry about budgeting for it. In addition, in some cases , the effect of retirement savings on their income is very minimal because of the effect of taxes.

4. Spruce Up Your finances

Ok, if you think paying yourself will just not cut, perhaps you need to spruce up your finances. I’m sure that there are some expenses that you can cut so that you can use the savings for your retirement or perhaps you can consolidate some of your loans and credit card to get a lower monthly payment and use the savings for your retirement plan.

Photo credit: Nikkinoguer