Ending September with a visit to ABC News, Shark Tank megastar and multimillionaire investor Kevin O’Leary took questions from the audience. While they may be a left-leaning news network, his financial advice is the kind that would make any capitalist blush. Simply put, the man knows his stuff. When asked how much income people should be putting into their 401(k), O’Leary made it simple. 15%. If you say you can’t do it, he advises you to cut out the unneeded expenses.
While most experts agree the amount should be between 10 and 20 percent of your net income, others believe that 20% should be the bottom number at age 30 and only go up as you age or receive promotions. The fact of the matter is, for most people, these kinds of figures are simply unattainable. Funds simply aren’t going up at a pace that matches inflation. With many people either still renting or aren’t getting started on a mortgage at age 30, saving 20% of your income is daunting.
Especially when 50% is already going to putting a roof over your head, this added expense for the future can feel damn near impossible. Five top tips can help you swim with the sharks and be ready for retirement, and they aren’t too difficult.
1. Get the Match- Most employers offer to match your contributions into a 401(k) or other investment account. Meet with your HR representative to discuss your options. In large or multinational corporations they may work with separate investment groups, especially if they offer a stock sharing program.
2. Don’t neglect expensive debt – The most expensive bill in your life will be the one you didn’t pay early. What most people fail to account for is that you end up paying interest on your interest with charge cards. By paying off your balance before interest is assessed, you can keep your credit utilization down, as well as not having to pay extra money in order to borrow money. Charging $1000 to pay back $1200 is rough enough. Charging $1000 to end up paying back $1460 is just poor financial literacy.
3. Put salary increases towards retirement savings – As you go along in your career, you should be making more money every year. When you change careers or jobs, you should be making more money as you advance. Dedicating most (if not all) of these increases towards your savings not only means you’ll have more to retire on, but you’ll also be able to diversify those funds with ease.
4. Cut unnecessary expenses – While this should seem the most obvious, it is also the most difficult to do. Things like Starbucks fraps before work, eating lunch at the work cafeteria, or eating out after work add up so easily, and it’s hard to notice. Even if you spend 50% of that money on making it yourself, how much could you save a month? $200? $500? Then there are apps, subscriptions, and name-brand items. Can you really taste the difference between Hunts and store-brand ketchup?
5. Start immediately – Much like diet and exercise, the best time to start is right now. Putting off these changes only means they’ll be harder to implement, and they’ll take more work to get to the figure you want to retire for. With so many realizing too late in life just how much they’ve wasted and how little they have left themselves, living with the kids or residing in a trailer park is all they can afford. If that’s all you want, God bless, but many of us would like to save that indignation, and starting right now can help that be a reality.