After 2033, the Social Security Administration will only be able to pay 75 percent of scheduled benefits. What does that mean for you? Basically, you should not count on getting much Social Security when you retire. Fortunately, there are some easy steps you can take now to prepare for retirement as well as any financial bumps you might come across along the way.
Create a Budget
The golden rule of personal finance is that you cannot have more money going out than you have coming in. The best way to keep track of that is to create a budget. How much money do you make each month? How much of your income do you need to devote to rent/mortgage, utilities, transportation, food, clothes, etc.? The first time you create a budget, it will be hard, but you will get better at it. Here are a few tips to get you started.
Set aside Some Money for an Emergency
Did you know that 63 percent of Americans would not have enough money to cover a $500 emergency? Because of this, when there is a tough situation, we are forced to go into debt. On the other hand, if you slowly build up $1,000 in a savings account and don’t touch it until you have an emergency, it will make your life much easier. Equallyinvesting in a health insurance plan and other additional insurances such as renter’s insurance will help save the day when you have emergency expenses that you would not be able to cover on your own.
Tackle Your Debt
The average person with credit card debt pays $855 in interest each year. For car loans, it’s about $900 in interest. And, if you have a mortgage, you are paying an average of $5,646 in interest each year. Getting out of debt will save you thousands of dollars every year. There are two ways you can do this. You can either pay extra on your debts from smallest to largest or go in order from highest interest rate to lowest interest rate. We recommend the former because then you have small victories you can celebrate immediately.
Save for Retirement
The earlier you get to this step, the better off you will be when you retire. When you put your money in good growth mutual funds, your savings will grow by up to 12% each year. If your employer has a 401(k) match program in place, you should take full advantage of that.