What Steps Should I Take to Save for Retirement?

Dear Deborah,

I know I need to start saving for my retirement. But I also have high credit card balances, car loans and a mortgage. There’s no more money left over to save. What is my best course of action?

The first step is to take control of your financial statement. That is, look at your Income Statement and Balance Sheet for ways to increase your cash flow.

Your income statement lists your Income and Expenses. Your balance sheet lists your Assets and Liabilities. These financial statements give you a true picture of where you stand financially.

Examine your monthly income and expenses. You can accomplish your retirement goals more easily as you decrease your monthly expenditures and increase income. What regular living expenses like shelter and food can be reduced? How can transportation and housing expenses be cut back?

Work toward paying off your credit cards and car loans as quickly as you’re able. Credit card debt and car loans are liabilities. As you get rid of these liabilities you can add more to the asset side of your balance sheet. Avoid future debt by paying for consumer items with cash.

When looking at your financial statements you will have a better picture of where your money goes. When you can manage the money you have, with growing and regular cash flow, you minimize the short-term money problems.

Secondly, have a plan for saving and stick to it.

As you find money to save and invest you can: 1) Deduct a percentage of your paycheck and save it in an employer-sponsored retirement plan. 2) If you have direct deposit with a financial institution, have a monthly dollar figure automatically set aside in an IRA account. More savers are favoring Roth IRAs. 3) Invest any money you get from gifts, bonuses or extra jobs. 4) When you invest in stocks or mutual funds, automatically reinvest the dividends on your existing investments.

Remember that just as people choose their own cars or vehicles, there are different vehicle choices for investing. Some drivers like trucks, vans, or SUVs. Some like sports cars, mid-size cars, or compact cars. People have particular reasons for choosing their mode of transportation..

Just as different people drive different vehicles, people invest in different things. Find the savings and investment vehicles that work best for you and your family’s needs.

Whether retirement is around the corner or it seems a long way away, knowing that you’ve begun to take action is rewarding.

Copyright 2012. All rights reserved. Permission to reprint required.

Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. She is the award-winning author of The Art of Debt-Free Living and the popular 12-lesson Bible study Living a Balanced Financial Life.