The best, first, thing you can do for your retirement success is to start saving. Even if it is a small amount, start today. Every day you delay will cost you.
Your savings should be regular or automatic. Save a regular amount every month or every two weeks or every week. Make these savings automatic. The most effective way to do this is to have your employer take the savings straight out of your pay. That way you never see the money. If you don’t have access to an employer-based retirement plan, set up automatic deduction through your bank account.
Here’s why regular, automatic savings work:
- If savings aren’t automatic, you almost certainly won’t get around to it, which will cause you to undersave. Every year you undersave makes retirement more expensive.
- Automatic savings evens out the impact of market ups and downs. This is called “dollar cost averaging.” You will be investing regularly whether the market is going up or going down. This discipline helps you avoid very common mistakes investors make in trying to time the market. When investors try to do that, they almost always lose.
- Automatic savings are habit-forming. Think of them as an exercise routine, but with much less effort. Once you start automatic savings and stick with them for awhile, you’ll be much less likely to stop in the future.