Check out these four tricks used to get you to spend more (without you knowing it).
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Ah, summertime! That glorious season when school’s out and the living is easy. Days consist of sprinklers, swimming holes and sand between your toes. Evenings are filled with fireflies, s’mores and friendly porch swing chats.
Of course, all this easy living doesn’t come cheap. Research shows that between vacation and keeping the kids busy with camps and other activities, summer fun can cost the average family of four more than $6,000. Add home improvement projects to the seasonal mix, and that total jumps to nearly $10,000!
There’s nothing wrong with living footloose and fancy free a few months out of the year. But is summer’s carefree attitude diminishing the best that’s yet to come? Let’s take a look.
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A Million-Dollar Difference
It’s no secret that many Americans are behind on their retirement savings. The Employee Benefit Research Institute’s latest Retirement Confidence Survey found that 69% of workers have less than $50,000 saved for retirement—and 36% have less than $1,000!
So why don’t American workers have more money saved for retirement? Because they’re setting aside less than half of what’s needed to build an adequate nest egg.
Dave recommends contributing 15% of your household income into tax-advantaged retirement accounts to retire comfortably. Yet the median worker defers only 7% of their salary to a 401(k) or similar retirement plan, according to the TransAmerica Center for Retirement Studies. If the typical household brings home $50,000, that means they’re saving $3,500 a year for retirement but spending $6,000–10,000 a year on summer fun. Something’s wrong with that picture!
Let’s take a closer look at what you could be missing. If you make $50,000 and invest $3,500 per year in good, growth-stock mutual funds for 30 years, you could retire with $634,000–947,000. That’s a decent start, but you can do better! By buckling down and investing 15% of your income—$7,500 a year—you could retire with $1.3–2 million. That’s a million-dollar difference!
Today’s Wants or Tomorrow Needs?
Saving an extra million dollars might seem like the impossible dream, but it’s easier than you think. That’s because interest does all the heavy-lifting in your investment. For a $50,000 income, the difference between 7% and 15% is just $4,000 extra a year.
Why not look for opportunities to close the gap by cutting back on summer expenses? For example, sending two kids to day camp instead of overnight camp could save you $830 a week at one summer camp. Your actual savings may vary based on where you live and whether the camp is run by a community or private organization.
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Here are a few other cost-cutting ideas that could save you hundreds or more:
- Keep summer travels within driving distance to save on airfare.
- Travel with friends or family to help split the cost.
- Do home improvement work yourself instead of hiring a pro.
Of course, we’re not suggesting you give up summer fun altogether. Family vacations create special memories that last a lifetime. That’s important!
Just remember, memories won’t pay the bills in your golden years. If your retirement fund is lackluster because you’re taking a 10-day cruise every summer, it’s time to adjust your priorities. Don’t spend all your money on short-term fun without considering the long-term impact.
Don’t Break Your Retirement Stride
There’s nothing wrong with making the most of your summer. Just don’t let lazy days get the best of your nest egg. Commit to saving 15% and stick with it! Your future will thank you for it.
Need help staying motivated? Talk to a trusted investing pro who has the heart of a teacher and can help you keep your eye on the prize in every season. If you don’t know one, we can introduce you to a financial advisor who Dave recommends in your area.