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Hurray for summer! Those magical months when time slows down, we throw our schedules out the window, and we live to relax!
Does that sound like your summer plan? Probably not. As much as we’d all like to spend the summer in kick-back-and-relax mode, few of us are actually that fortunate. You’ve probably already spent a lot of time planning out your summer schedule—vacations, weekend excursions, camps, sporting events and other activities to keep the kids occupied while school’s out.
All that busy-ness comes at a price. Parents say they expect to spend $958 per child on summer activities alone. Top that off with the traditional summer vacation, and a family of four will easily spend $7,000 on leisure activities by Labor Day.
Hey, we love summer fun too! And we know that forgetting about your financial priorities is as easy as slipping on a pair of flip-flops. But if you’re not careful, your summer plans could end up costing you much more than a few thousand bucks in the long run. How can you find the balance between living it up and still work toward your long-term goals like retirement?
Our Savings Shortage
First, let’s take a look at our retirement savings gap. Dave and most financial advisors say you can expect to retire comfortably if you invest 15% of your income toward retirement. But the average worker actually invests less than 7% in a 401(k) or other workplace retirement plan. For a typical household making $50,000 a year, that’s $3,500.
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But the average family will spend twice that much on summertime activities! In a recent retirement survey, workers said they couldn’t save more than they do for retirement because of their day-to-day expenses. But it looks like our summer spending habits are also keeping us from our goal of a secure retirement, doesn’t it?
By investing $3,500 a year for retirement in good growth stock mutual funds, you could have nearly $950,000 in 30 years. That’s not bad, but is it enough? Investing 15% of your income—$7,500 or $625 a month—you could retire with a $2 million nest egg! That’s enough to give you the retirement lifestyle you’ve always dreamed of and leave a valuable legacy to your family.
All Work and No Play? No Way!
You don’t have to completely sacrifice your summertime schedule in order to afford your retirement plan. Simply budget for both and give retirement a priority position. If you have to cut back somewhere, cut back on your summer spending—there are plenty of ways to do that and still have a great time.
- Drive instead of fly.
- Book a hotel or condo with a kitchen so you don’t have to eat out for every meal.
- Choose a less expensive destination.
- Travel outside peak periods.
- Shorten your trip—long weekend trips are a great option.
As far as the kids’ activities go, most kids only need a couple of distractions during the summer. You don’t have to plan out every minute. Let your kids choose one or two activities that mean the most to them, and keep their schedules free for classic summer fun like neighborhood bike rides, water gun fights, fort building—maybe even some downtime with a book!
Do What You Can to Stick to the Plan
Fitting retirement savings into the budget is a challenge for nearly every family. But you can do it and still create lasting summertime memories with your family. Talk with an experienced investing advisor (we can show you some in your area) who will help you make the most of the money you’re setting aside for retirement. Your advisor will also keep you motivated and show you how sticking to your plan—even when you’d like to take a break—will pay off for you and your family years down the road.