Suze Orman’s Playbook for Retirement Income
It’s not too late to plan your finances, build your savings and get closer to the nest egg you need for retirement.
Personal finance expert Suze Orman has taught people how to achieve financial freedom for decades, and her playbook provides a solid foundation for those just starting out or needing a refresher. Here’s Orman’s inspired four-step guide to saving enough to reach your financial goals without panicking.
1. Take inventory
The first step to changing your finances is understanding where to start. Review your income and where your money is going every month, whether it’s spending, paying bills, saving or investing.
Writing down these calculations will help you determine how much you can save for retirement and other future goals, and whether there are any expenses you can eliminate.
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2. Check your emergency fund
Orman often asks his audience how long they would last if their paycheck stopped tomorrow. A question that can help you get an idea of whether you need to build your emergency fund to be prepared to pay for something unexpected, such as an unexpected medical bill.
Financial advisors often recommend having enough money saved in a liquid account, such as a high-yield savings account, to cover three to six months of your living expenses (think things like housing, utilities, groceries and gas). Orman recommends saving more: Set aside enough to cover at least eight months of living expenses, he says. When you retire, you probably want to build that number up to your expenses for at least one to two years.
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3. Organize your money according to your needs and wants
To save, it’s important to understand your spending patterns and use them to determine how much you should save going forward. Reviewing your spending can help you group expenses into two groups: wants and needs.
Needs are your essential purchases, such as food and housing. While it’s possible to downsize your home to save money, you still have to pay the mortgage – it’s not something you can completely cut out of your budget. What is wanted is non-essential purchases, such as concert tickets or going on vacation with friends.
After assessing your past spending, plan your goals based on wants and needs. Perhaps you allocate more to your wants than your needs, which can cause financial problems in the near future.
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4. Create an application to save
Even if retirement is within reach, you can still improve your finances before you say goodbye to your job for good. A specific five-year window can give you enough time to adjust and get closer to your long-term financial goals. Set realistic goals for each year that focus on your savings levels, debt reduction and income growth.
For example, maybe you can start making participating contributions to your retirement savings accounts, or you intend to pay off your mortgage before you retire.
