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Exercise, Diet, and Financial Wellness - 3 Tips to Ensure You're in Good Financial Health for Retirement
To maintain good physical health, most people must exercise regularly, eat a balanced diet, and keep stress to a minimum. Achieving financial wellness is no different. It requires careful planning, smart decision-making, and consistent efforts toward improvement. Below, we discuss three tips to help you gain and maintain top financial health in retirement.
Figure Out Your Retirement Number
Just as you set concrete fitness goals for yourself, like running a half-marathon or losing 10 pounds, it's crucial to set clear financial goals for retirement. The most critical of these goals is determining how much money you'll need to maintain your desired lifestyle once you leave the workforce for good.
You'll want to start with your current annual spending level to get a rough ballpark of this number. Then, subtract any budget items that will be reduced or eliminated in retirement, like clothing, dry cleaning, parking expenses, gas, and vehicle wear and tear. If you plan to pay off your mortgage or downsize your home in retirement, you can also eliminate these costs from your projected budget.
Next, add any additional costs for healthcare coverage, travel, and other leisure activities that aren't part of your current budget. By crunching these numbers, you'll have a much better idea of how much you'll need each month.
Once you have your retirement budget, you can work backward to see how much of a nest egg you'll need to cover these expenses. (Don't forget your Social Security income!) Your retirement number can vary depending on when you'd like to retire. The younger you are at retirement, the longer you'll be retired, and the more money you'll need.
Create a Budget and Stick to It
Budgeting is like following a diet—it helps you track your spending, identify areas for reduction, and ensure you're living within your means.
Start by tracking your expenses and categorizing them into essential and discretionary spending. Essential spending includes non-negotiable costs like your mortgage or rent, utilities, and debt payments. Discretionary spending includes categories with more wiggle room, like food and entertainment. Keeping your essential costs as low as possible will free up more funds for saving and discretionary spending.
Pay Down Debt and Potentially Avoid Financial Pitfalls
Debt can weigh you down, just like extra weight can affect your physical health. Prioritize paying off high-interest debt, like credit card balances, personal loans, and auto loans. This can go a long way toward reducing financial stress and freeing up funds for saving and investing.
Much of wise money management isn't in what you do but in what you avoid. You'll be ahead of the game by steering clear of the most common financial pitfalls—overspending, borrowing beyond your means, or failing to save for emergencies. Just like crash diets can cause your weight to quickly rebound once you resume your normal habits, quick-fix financial solutions can have adverse consequences in the long run.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This article was prepared by WriterAccess.
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