By Nick Vail
I meet with families from many different walks of life. They have different goals, values and dreams. However, one thing is common among them: $1 million is a bogey that many aspire to accumulate in retirement savings. Want to grow your retirement plan to $1 million or more? This article is for you.
Why is the million dollar goal so common? For many, the thought of being a millionaire seems like entrance into an elite club. Others believe that this is the magic number to reach in order to retire comfortably. (To read more from this author, see: Professors: Slash Your Debt or Build a Nest Egg?)
Fact is, there are many variables to consider when trying to plan for retirement. One million dollars may be enough for some, too much for some or not enough for others. However, having a goal is a fantastic start to your financial planning. One million dollars is a lot of money and is attainable. Here’s how:
Maximize Your Company Match
If you have a company match, you better be contributing at least enough to receive the full match. Not contributing that amount is like giving up free money. At a minimum, you should save 10% of your pay for retirement. This may seem hard but it is doable. If it isn’t doable for you, then you need to take a long look at your budgeting. We need to make saving for retirement a much bigger priority. Most of us won’t be lucky enough to have the pensions our parents and grandparents enjoy. The onus is on us to save for our retirement and 10% is a great starting point.
Keep It Simple
Don’t over think it. You don’t need to have Warren Buffett's investing acumen to save up $1 million. Work with a financial advisor to help you. He or she can help you establish an investment policy based on your risk tolerance, total household assets and goals. Stick to this policy and track your progress. Do not listen to the talking heads on cable channels. They are simultaneously giving you inappropriate advice and trying to drive ratings.
Make saving for retirement a priority. It needs to become a must do for you, not a will do when I can. Don’t save what remains after monthly expenses and leisure spending. Save first and your fun money should be what is leftover. Treat saving as a bill. As I touched on earlier, start with the goal of 10% of your income and try to build upon that. Keep it up. Get momentum. Don’t waver. This is a long-term goal. It will only happen if you invest early and often. (For more, see: 4 Keys to a Satisfying Retirement.)
Don’t Be a Creep
Ok, not you. You can be a creep all you want (if that’s your thing). But when it comes to your lifestyle, don't creep. What does this mean? If you get a 5% raise, don’t then say, “I can now afford to trade in my Ford Fusion for a Beamer.” Lifestyle creep is when you consume more because you are starting to earn more. Sure, a little bit is alright. Sometimes it is important to treat yourself. Just be smart about it. If you get a 5% raise, try something new. Increase your retirement contributions by 2-3%. Look at the rest as your “actual” raise. You still have more money in your pocket but you are also force-feeding your nest egg.
Don’t Dip Into It
Your retirement plan is not a bowl of guacamole, stop dipping into it. If you find yourself needing to use the money often, then you need to reevaluate your budget. You should have an emergency fund that you use when you need cash in a pinch. Keep the emergency fund apart from your normal checking account so that you aren’t tempted to use it for everyday purchases. Use this account when your car breaks down or your basement floods. Do not use it for gifts and vacations. Again, use it only for emergencies. Do not tap into your retirement plan unless you have no other options.
So you want a million dollar nest egg, huh? It’s a great goal and is attainable. Is it easy? Heck no. It takes great discipline and commitment. Use these tips to help you on your journey to $1 million. I believe in you. (For more, see: Professors: Stop Drowning in Student Loans.)
This article was originally published at Investopedia.com.