Welcome to the final article in this 3 part series. In case you are hyperventilating after doing the exercises in the last article, take a deep breath and relax; it's not that bad. I went from low wages and zero savings to semi-retirement in 15 years (mortgage paid off and zero debt); if I can do it, you can too. Are you are spending all that you earn (like most people) living paycheck to paycheck? If so, you need to make a big change now in order to accumulate anything in preparation for retirement. Let's assume that you need to accumulate $500K in the next 20 years and 8% is your expected return. You will need to add, on average, $10K to your retirement fund each year. I say "average" because the rate you earn will vary, you will increase your earning power over time, you will reduce your spending, and you may accumulate some home equity to supplement your fund. Use your MoneyManager to get a good idea of how much you need to save each year (as a starting point). Each year you will review your Income and Expense Summary and will see how much extra funds you have saved and invested. You will review and update your Investments spreadsheet and know how much you have gained and add this amount to your total saved. If you own your own home, you can update the home value and mortgage amount; a part of your equity increase can be added as well. At year end, update your Progress Report tab. This will give you a snapshot of your progress to date and show where you will be if the past trend continues. You can make plans for immediate improvement and rest easy knowing that you are doing all that you can. How can you cut your expenses? Can you share rent? You can take advantage of grocery sales by planning your shopping around the sales in flyers and take advantage of coupons. What about using transit or carpooling? Go through your list and make the tough decisions to cut out the luxuries and focus on your needs. Do you need lotto tickets? What about tobacco and alcohol? Can you make do with a 5-year old sedan instead of a new SUV? Ask an accountant friend or coworker about how to reduce your taxes; most accountants would be flattered that you asked! Other than cutting expenses and investing your savings, you can improve matters by increasing your income. Be willing to invest in yourself by upgrading your skills to increase your earning power. You made it! You have the tools that you need to make your financial dreams come true. Set aside an hour each month to update your spreadsheets and another hour or two at each year end to review your progress and make necessary adjustments. Celebrate each success with a treat for yourself!
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