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NerdWallet: 4 steps to get on track and start saving for retirement

This article is reprinted by permission from NerdWallet

Maybe you feel like you don’t earn enough. Or you don’t understand how investing works. Or maybe you can’t organize your finances. These are factors that can lead to financial stress and set back your retirement savings.

A lack of assets and money management challenges are contributing factors to high levels of financial anxiety and stress, according to a 2021 report called Financial Anxiety and Stress Among U.S. Households from the FINRA Investor Education Foundation and Global Financial Literacy Excellence Center.

“We also find that financial anxiety and stress can have long-term consequences: those who are financially anxious and stressed are less likely to plan for retirement,” the report says.

Sometimes when people are worried about something financial, they just ignore it, says Adam Frank, a certified financial planner and registered investment adviser based in Los Angeles.

“But the problem is, the longer you wait to start investing, or continue investing, for retirement, the more you have to do later,” Frank says.

Strategies for reducing financial stress

If financial stress is affecting your ability to save for retirement, you may have to work longer and you may also risk running out of money in retirement. In fact, 60% of individuals from the 2021 Natixis Global Retirement Index say they’ve accepted they may potentially work for longer than they planned. And 40% feel it will take a miracle to retire securely. But getting started as soon as you can could help you reach your retirement goals faster.

If you’re anxious about your ability to save for the future, here’s how you can manage those feelings and get on track.

1. Create a realistic budget

“The first thing will be to get organized — you know, the big, bad B word, it gets a bad rap, it’s budgeting,” says Lauryn Williams, a Dallas-based CFP and Olympic medalist in both women’s track and field sprint and two-woman bobsled.

Budgeting can help you save more, because you’ll learn where your money is going, which can free up opportunities to shift your priorities. Williams suggests creating a “bucket budget,” which is a set amount you can spend in each financial category. Examples of buckets include household items, recurring bills and entertainment. Retirement can be a bucket, too.

“It’s not accounting for every single penny, [or] every single transaction, which can be really overwhelming and create more financial stress, especially if you’re doing it on your own,” she says.

Another budgeting tip Maggie Gomez, a CFP based in Orlando, Florida, suggests is downsizing, so you have more money to pump into retirement savings. For instance, you could get a less-expensive car or get a roommate to cut housing costs.

“You’re not reducing the quality of your life. You’re giving yourself a better future, and it’s not going to be much longer until you really feel those rewards,” she says.

Check out more at: Help Me Retire

2. Take inventory of your retirement savings

Financial advisers suggest you take stock of all your retirement accounts. If you have old IRAs and 401(k) accounts, Frank suggests doing a 401(k) rollover to move you assets into your current 401(k) or an IRA. This way, you have a clear picture of how much you have, which will help inform how much you need to save.

If you can save for retirement but are still falling behind, Frank suggests automating payments.

“If that means putting $500 a month towards your IRA and treating it like a bill, you’re going to max out your IRA,” he says.

Related: It’s not too late to start investing in your 50s and 60s, you just need the right strategy

3. Track your progress

Feeling like you aren’t making headway can trigger more financial stress. Gomez says you could track your accounts as you contribute. Seeing the progress you’re making could evoke positive feelings and remind you that you’re investing in your future, she says.

She also advises people to manage their expectations and not expect tremendous growth during the early days of investing.

“When you first start investing, the majority of your account’s growth is going to come from your own deposits versus from market returns. So the more money you can put into the account sooner, the more your account will compound,” she says.

Read: I retired at 50, went back to work at 53, and then a medical issue left me jobless: ‘There’s no such thing as a safe amount of money’

4. Ask for help if you need it

To help relieve financial stress, Williams suggests being transparent about your situation with a financial adviser or financial therapist, friends or family.

“Simply opening up and saying, ‘I don’t know how 401(k)s work’ can help alleviate financial stress because one of your friends might do the 401(k) all the time,” she says.

Getting clear about what you don’t know and filling those information gaps could help you gain a better understanding of your financial situation so you can move forward confidently.

More From NerdWallet

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Survey: Just 23% of Investors Align Most Investments to Their Values

How a Financial Therapist Can Help Shift Your Money Mindset

Elizabeth Ayoola writes for NerdWallet. Email: eayoola@nerdwallet.com.

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