Tips to tackle money when you are behind on retirement savings
Even though the retirement seems to be far away, it is never. Many of you think that you can easily set aside money for your retirement, but there are times when you are unemployed or your ay does not hike, making it much more difficult to stash away for your retirement. Sometimes, you are so caught up by big, unexpected expenses that you end up withdrawing money from your retirement funds. This causes a tax penalty.
Well, there are times when you are to put your retirement savings on the back burner when something else is your priority, but at the same time, you need to ensure that you will quickly bounce back. If it is not too late to save money for the golden years of your life, you can still take many steps to catch up on your retirement savings.
What tips should you follow if you are behind on retirement savings?
Here is what you can do to fill the gap in your retirement funds quickly:
- Change your goals
It is crucial to reassess your goals if you have fallen behind on your retirement savings. At this time, you will have to readjust your retirement age. If your budget allows you to recuperate from the shortfall, it is fine, but otherwise, you will have to extend your retirement age.
Changing your goals might be daunting, especially when there is not much time left for your retirement, and one of the most important reasons for this intimidating feeling is that it seems quite difficult to work harder to achieve your goals. Unfortunately, you have no way other than biting the bullet.
Be careful about setting new goals. Make sure they are relevant and achievable. In the rush to achieve, do not set any goals that you cannot achieve within time. Unrealistic goals will increase your complications. It is always advisable to break them down into achievable milestones.
For instance, saving £1,000 every month can be difficult, especially if you have to bear other household expenses, but it does not mean you cannot achieve it. You should try to determine how much you can afford to stow away. You might have to cut back on your expenses.
- Manage your debts more wisely
Mortgages and car loans are some debts you can expect to stick to you for some more time, but you should try to say no to other debts, including credit card bills. Credit cards are not a threat as long as you pay off the bill on the due date. Many a time, you find yourself taking out a £1.000 loan for emergencies. These loans are very easy to qualify for, but they carry high-interest rates. Do not forget that you will have to pay interest on top of what you borrow, and it can be three or four times the borrowing sum. This is one of the reasons why you struggle to build your retirement funds.
To meet unexpected expenses, you should have an emergency cushion. These funds should be separately created from the retirement funds so you do not dip into them in case of an emergency. Having an emergency cushion will keep you from borrowing loans as well. You should try to settle personal loans for planned expenses, such as a £3,000 loan with bad credit, as soon as possible. The sooner you free yourself from debt, the sooner you will be able to grow your retirement funds.
- Automate your savings
One of the most convenient ways to ensure that you are consistently setting aside money for retirement is to automate your savings. Try to sign up for an employer retirement plan. You can contribute more than the desired amount. If your employer does not offer a workplace pension scheme, you should enroll in a private pension scheme. Make sure that you link your account to it and opt for an auto debit mode. This will help you stick to your contribution towards the pension scheme.
Likewise, you should also automate your emergency cushion. Open a separate account for emergency savings as well. Link this account to your pay account and set a limit so it pulls that much money every month the day after you receive your pay. Increase the limit as your pay increases. You should carefully analyse your monthly expenses and then figure out how much your budget allows for stashing away for unexpected expenses.
- Start a side gig
If you are behind on your retirement savings, you may have to cut back on your expenses, but that might not be enough for you to catch up. You do not have too much time to save money for your retirement, so it makes sense to find a side gig or a part-time job.
Income from your side gig or part-time job should be contributed to your retirement. However, this is possible only when you are able to meet all of your expenses from your primary job. When it comes to finding a side gig or part-time job, you should try to do work that absorbs you.
There is no need to take on laborious tasks as you will be burnt out. As a result, you will struggle to focus on your main job as well. For instance, managing social media accounts for your business clients could be a great idea for your part-time job. Do some online research to understand the market and then pick a job for you that you can manage along with your main job without taking a toll on your physical and mental health.
The final word
It can be scary when you are behind on your retirement savings, but you can get control of your money to speed up the savings process. You should carefully analyse your budget and see if it has some room to cut down on your expenses. Build an emergency cushion for unforeseen expenses so you do not have to dip into retirement funds and take out loans for them. Last but not least, start a side gig and put that income into your retirement account.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.