Don’t Let Bad Spending Habits Hurt Your Retirement Goals

ByTroy Davis

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The way we handle money becomes habitual over time. Much like smoking, drinking too much, or even biting your nails are bad habits, the way you spend can get you locked into a bad habit that can thwart your retirement goals. It is vital to identify and then correct any bad spending habits you may have developed in your life. There are several steps you can take to keep on track and meet your retirement or other financial goals.


1. Figure out your ‘wants’ and ‘needs’ 

The first thing you must do is identify your needs and wants. This is a vital first step into understanding where your money is being spent and which expenses may not be “necessary”.

Needs are the basics in your life: food, clothing, shelter, paying off debt, and transportation. Internet and cable can also fall into needs but there are creative ways to even cut out cable and possibly save some money from month-to-month. The most overlooked item that you should add to the “need” category would be retirement savings. You need to allocate part of your income towards retirement savings because one day you will either not want to work or not be able to work.

Once all needs are accounted for, you can subtract the total needs amount from total income and you have your “wants” money. “Wants are anything outside of the “needs” category. Should you still have money left over at the end of the month, stick it in your savings or investment account. This removes the temptation to spend it and lets you start the next month fresh again. If you consistently have money left over, increase your savings amount.

2. Automatic Savings 

Having a consistent savings mechanism will ensure you are saving a minimum amount each month or paycheck, making progress toward your longer-term goals. Whether you are saving into an investment account or a savings account, you should set up an automatic contribution from each of your paychecks so that the money is gone from your normal spending account and you won’t be tempted to touch it.

What can you accomplish by doing this? Consistency and convenience. If you have no automatic savings plan, you could be saving $500 one month and then $0 the next. While this is better than not saving at all, it is not a good practice to adopt. You can start small and increase it as you are able. You might find yourself surprised how in time you no longer miss the money.

3. If your employer sponsors a retirement plan then use it 

Saving for retirement is the most important financial habit you can build for yourself. The key benefits to 401k and other similar plans is the money you contribute is deducted from your total taxable income and can grow tax deferred.

Some employers may offer a matching contribution to your 401(k), it’s especially important to contribute enough to take advantage of this benefit. Don’t turn you back on free money! If you do not take advantage of such a benefit it is the equivalency of turning down a raise.

Even if your employer does not offer a retirement savings plan, you should consider an Individual Retirement Account(IRA). If you are self-employed there are inexpensive types of retirement plans you can set up to save tax-deferred money.

4. The Time is Now 

When it comes to investing time is your best friend. Thanks to the compounding effect of investing, a small amount today can really add up over the years. Simply stated, compounding is earning money on money that you earned. The earlier you start the longer the compounding effect works in your favor.

Boosting your savings in the near-term creates better returns in the long-term even in low interest environments. Remember that time is your friend when it comes to investment returns on savings.

Work Towards Your Goals 

It can be very hard to break habits when it comes to your finances. If you try any of these steps start with an automatic withdrawal into savings, preferably one that is hard to access in case temptation rears its head. Once you start you will realize over time that you do not miss the extra money as much as you thought you would. If you do not have a plan or need help with one, let us know how we can help or find more information at

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