According to Frank Paré, a certified financial planner and founder of PF Wealth Management Group LLC in Oakland, California, many people “are just really unsure of what the process is” to saving for retirement. Here is his simple 5 step process:
- Forget yesterday. “Do not get caught up in what you haven’t done. It just creates this internal angst,” he said. “It’s time to focus on what you can do now.”
- Automate savings. Set up an automatic transfer from your checking account, ideally into a savings account that’s harder to raid. Online-only banks, which often offer slightly better interest rates than traditional banks, usually entail a slower withdrawal process, which can be a good thing.
- Get to positive cash flow A workable savings strategy requires that you’re not overspending. Your next step is to track income and spending.
- Build your reserve. Your reserve account is essential to ensure that unexpected emergencies don’t waylay your finances, forcing you into high-cost credit-card debt or into pulling money out of tax-deferred retirement savings (depending on the circumstances, that can bring a tax hit and other penalties).
- Create buckets based on goals. Next, nail down your short- and long-term goals and allocate your money accordingly. “Start to attach goals to the money that you are setting aside,” Paré said. “Now that the reserve is built, perhaps the next goal is to build up a certain amount of money for your retirement.”
For more insight to Paré's steps read the full article at MarketWatch.com