Many people believe that the best way to save for retirement successfully is to make the most money possible from their investments. That never hurts, but there's a simpler way to ensure that you'll be able to make ends meet both now and in retirement, and if you follow it, you'll also put yourself in a much better position for your investments to perform the way you need them to in order to reach your financial goals.
What won't save you
I'll get to what those two words are later in this article. But first, I want to talk about some things that you can't count on to get you to a healthier retirement -- at least not by themselves.
One of the things retirement investors do to try to get ahead is to pile into particular sectors. For instance, small biotech companies Exelixis
You see the same all-or-nothing style bets with oil exploration company ATP Oil & Gas
Similarly, levered sector ETFs like ProShares Ultra Oil & Gas
Concentrated bets can sometimes work if you have special expertise in any area, but putting your entire portfolio at risk is still a bold call. You might get lucky, but you could just as easily lose everything -- and that's a risk most people simply can't afford to take.
Getting blood from a stone
Other advice you often hear from financial planners is to boost your income. But in tough times, you simply can't count on being able to do that. In tough times, many workers are already stretched to the limit in their attempts to try to keep their jobs and maximize their income. Others are desperately searching for more work but have had no success.
Moreover, even during better times, you may just be unable to work any harder than you do. And while taking time off to get more education might eventually lead to higher income, it's tough to make the sacrifice now to get that faraway payoff.
Let these two words save you
No, the best advice for most investors is simple: spend less.
Sure, some people have already cut their budgets to the bone. But I'd wager that if I challenged you to take a close look at your spending over the past several months, you could come up with at least a few areas you could cut back on.
The thing about cost-cutting is that it saves you twice. First, it frees up more money for savings. But more importantly, it also allows you to set more realistic goals for your retirement nest egg -- because if you don't spend as much, you won't need as much money when you retire. That in turn gives you the flexibility to avoid taking huge bets with your money, instead making room for safer all-purpose investments like index ETFs or mutual funds.
The thought of looking at your budget is enough to drive some people to tears. But if you haven't been paying attention to where your money's going, odds are that you'd find some big leaks -- and if you plug them, you'll be able to be a lot more comfortable with your finances.
So to take the pressure off your investments and figure out some ways to spend less. It may be the most liberating thing you ever do with your money.
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Fool contributor Dan Caplinger gets a little closer to retirement every day. He doesn't own shares of the companies mentioned in this article. The Fool owns shares of Exelixis, which is a Motley Fool Rule Breakers selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy means you'll hear way more than two words from all of us.