SOME 200 MILLION Americans say they want to write a book. Yet typing 50,000 words into a cohesive story can appear to be a monumental undertaking—and it might seem like only individuals with the freedom to retreat to a cabin in the woods will ever become published authors.
Making the long financial journey to retirement, so you quit the workforce with a nest egg large enough to replace your working income, can seem equally daunting. Indeed, it’s so daunting that many workers fail to even start, while others save at only a snail’s pace.
What to do? Writing a book and saving for retirement have one thing in common: They both require maintaining a sustainable average speed. What do I mean by that? At issue is the average pace you notch day after day, as you work toward your goal.
For book authors, it comes down to the number of words they write daily. Similarly, retirement savers can focus on the amount saved monthly for retirement. The benefit of this way of thinking: Small actions, if repeated consistently, can turn into major accomplishments.
Business owner and author Donald Miller once provided this tip to aspiring authors: Write 500 words every day for 100 days. There’s your 50,000-word book, equal to some 200 pages. This breaks down a huge goal into a manageable daily task, writing about two pages per day.
Focusing on a high but sustainable average speed is also the best approach to saving for retirement. Extreme frugality may help cut your spending for a short period of time. But it’s unlikely to be the right long-term strategy, because it’s so easy to get knocked off course. Your HVAC system might fail during a winter cold snap or you might get hit with an uninsured medical expense.
Instead, over the course of your career, I’d focus on maintaining a high average speed toward retirement. Here are four strategies that you’ll help you keep up your savings rate:
1. Invest more during good times. Even if you have a regular salary, you’re bound to have better income years than others. Received a year-end bonus or inheritance? Use it to pay off any lingering debt or make the maximum contribution to your retirement account.
2. Slow down during the lean times. Find yourself living paycheck to paycheck? Consider cutting back on your retirement contributions, so you can make sure your life’s financial foundation remains intact. That means refilling your emergency fund, while also avoiding consumer debt. An important aspect of maintaining a high average speed: not coming to a crashing halt.
3. Make sure you’re properly insured. As a working professional, one of your most valuable assets is your ability to earn an income. This is also known as your human capital. Protect this asset with health and disability insurance. Even the best financial plans will fall short if you suffer a sudden interruption in your income.
4. Gift to a donor-advised fund. Charitably inclined? During your years of higher income or lower expenses, consider not only saving more, but also contributing to a donor-advised fund. This allows you to make a onetime charitable gift, while giving you the flexibility thereafter to spread out your contributions to the charities of your choice. An added perk: The lump-sum gift may put you over the standard deduction threshold for that tax year, so your contribution is tax-deductible.
Ross Menke is a certified financial planner and the founder of Lyndale Financial, a fee-only financial planning firm in Nashville, Tennessee. He’s passionate about helping folks make financial decisions that reflect their true purpose. Ross’s previous blogs include Up to You, No Money Down, Cut It Out and Too Familiar. Follow Ross on Twitter @RossVMenke.