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Marginal Gains: Little changes can make a big difference


Mastering your finances and having a healthy relationship with money isn’t always easy. Far from it. But a few small adjustments in your day-to-day life can meaningfully accelerate progress toward your financial goals -– no matter how modest or ambitious those goals may be. It all starts with a commitment to spending carefully, saving diligently, and investing wisely. Consistency in your investment strategy and minor enhancements to your investments can make a big difference over time.

How a little bit can add up

Can you find an extra $100 per month to set aside toward your retirement? That comes down to about $3.30 per day. If you did that consistently, earning a 7% average annual return, that modest amount could add up to more than $51,000 in 20 years, approximately $117,600 in 30 years, and more than $248,500 in 40 years. The longer you accumulate that small daily amount, the more significant the results.

Can you bump up the extra savings to just $5 a day (or $150 per month)? If so, that total after 40 years would climb to more than $372,800. What if you’re able to generate an 8% average annual return instead of a 7% return? This small increase would grow your $150 monthly contribution to a total of $486,270 after 40 years. (No fees or taxes are assumed in these hypothetical calculations.)

Small steps to help strengthen your financial foundation

You should make it a priority to identify sources of money that can be added to your long-term investments. Here are some simple ideas on where to find extra money for your retirement plans and other savings needs:

• Be more cognizant of purchases that you might take for granted today. Cut back on meals out or treating yourself to whatever catches your eye while shopping. Capitalize on sale prices when buying groceries or other everyday staples and stick to your shopping list as much as possible to avoid splurging on unforeseen splurges.

• Be sure to boost your retirement savings every time you get a pay raise and try to grow your retirement plan contributions yearly to keep pace with inflation.

• Make sure you fully capitalize on an employer match, if offered, through your workplace retirement plan.

• Determine if there are ways to restructure any debts you carry to reduce interest costs and potentially lower monthly payments. Then, invest the difference.

• If time and your lifestyle allow for it, consider taking on a “side hustle” that can generate extra income that you can put toward your retirement savings.

• If you are 50 or older, take advantage of the “catch-up contribution” provisions in tax law to boost your retirement savings beyond the standard maximum amounts.

Now is the time to save

The sooner you can start saving more for retirement, the greater your opportunity to build more wealth. Now is the time to start searching for more ways to save while talking to your advisor about how to most effectively put that money to work.

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