When you work hard all your life, you deserve an enjoyable retirement. To have pleasant golden years, you need cash to do the things you love -- and pay for essentials such as housing and healthcare -- without worrying you'll run out of money.
Unfortunately, Social Security benefits alone can't provide the money you need to support yourself in life after work. That means it's up to you to create the financial security you deserve. This takes hard work and smart financial decisions over a lifetime, so you don't have time to waste.
Start doing these four things today to make sure you have the funds you need as a senior to see you through the rest of your life after you leave the working world.
1. Live on a budget
Most Americans have too little saved for retirement, and lack of funds is a top reason people aren't saving. In many cases, however, building and following a budget can help you to redirect your dollars so you spend less. Then you can allocate some of the money you save toward your future.
To make a budget, start by figuring out your income and the amount of it that has to go to necessities such as housing, transportation, and food. Then figure out how much to save for retirement -- aim for about 15% of your income -- and log that as a must-pay bill on your budget. Finally, distribute what's left of your cash among your other spending categories.
If you find you don't have enough income to cover the necessities, retirement savings, and a little bit of fun spending, this signals the need for big financial changes such as asking for a raise, looking for a side gig, downsizing your house, or getting a cheaper car.
Once you have a budget that will work, track your spending to make sure you're sticking to your limits and avoiding debt.
2. Make automated contributions to retirement accounts
When you have a budget that allocates a certain amount of money to retirement savings, you need to make sure that money is actually saved. Far too many people have the best of intentions when it comes to putting aside cash for retirement but then they end up spending all those funds, leaving them with nothing left to invest.
To make sure that doesn't happen to you, automate your retirement account contributions so the money is transferred directly to your 401(k) or IRA on payday.
If the money is automatically saved, you won't have the option to spend it. Your budget will tell you how much you can afford to transfer while still having enough to live on, and you won't be forced to make a tough choice each month to move money into retirement savings when it would be more fun to spend it on something else.
3. Avoid unnecessary debt -- and paying down what you owe
Debt payments and interest charges take away the money you need to save for retirement. And if you carry debt into retirement, paying creditors means you need to withdraw more from your investments to cover the essential bills.
While you'll likely need a mortgage if you buy a house -- and may also require student loans and car loans -- borrow the minimum amount you need and commit to paying off what you owe before retiring. Do this by figuring out a target payoff date, determining how much you need to pay each month to hit that target, and allocating the necessary cash in your budget to meet your goal.
You should also avoid going into credit card debt, because the interest costs are far too high to justify. If you already owe on your cards, put as much extra money as you can toward getting rid of the balance ASAP.
4. Invest your money wisely
Finally, you need to make sure the money you've saved for retirement is working for you. That means it should be invested in assets that produce a good rate of return while exposing you to a reasonable level of risk.
Investing in the stock market is usually the best approach to balance risk versus reward. Most experts recommend subtracting your age from 110 to figure out the percentage of your portfolio to put into the market -- so if you start investing at 30, you'd want about 80% of your money in stocks. You'll need to regularly review and potentially rebalance your portfolio to make sure these ratios remain correct for you.
If you aren't sure how to pick individual stocks, you can still invest your money in the stock market by buying low-cost ETFs or mutual funds without much investing knowledge.
If you have an appropriately diversified portfolio with a mix of different assets to keep your risk reasonable, you can expect an annual return between 7% and 8% when you invest in stocks. This is far higher than you're likely to get by investing in bonds, certificates of deposit, or high-yield savings accounts.
If your investments enjoy that 7% return, you could retire a millionaire by investing just about $15,750 per year over 25 years. But if you shied away from putting much money the market and got just a 2% return on that same investment in a savings account, you'd retire with only $504,477.
Don't wait to set yourself up for a secure retirement
The sooner you start living on a budget, paying off debt, and investing for retirement, the better your chances of having the money you need to enjoy your golden years. It's up to you to provide for yourself as a senior. Don't put yourself at risk of having too little cash and struggling during what should be some of the best years of your life.