There are many ways to fund your retirement goal. When the economy and stock market are not cooperating, another approach might be to lower how much you need to live off of. Here are a few things that you can lower your expenses:
Keep your housing costs low. According to a Joint Center for Housing Studies at Harvard University, 36% of all American households (both homeowners and renters) spend at least 30% of their pre-tax income on housing costs. You can lower your housing costs by paying off your mortgage faster. For ways to pay off your mortgage faster than normal, see my blog Mortgage Habits of Millionaires. If paying extra isn’t an option, you might be able to refinance at a historically low rate and continue the same payment. Another way to lower your housing costs is to shop around for lower homeowners or renters insurance.
Keep your vehicle costs low. The average person spends 18% of their income towards transportation. Almost half of that (8.5%) goes towards vehicle purchases and finance charges. One way to lower this amount is to avoid finance costs by saving for, and paying cash for your cars, and driving them as long as possible. According to Dr. Thomas Stanley, the average millionaire drove their cars for more than 15 years. Of course you can also lower your transportation costs by getting quotes for auto coverage as well. For more good car habits, see my blog Avoiding Blackhole Car Habits.
Get rid of personal debt. Even though household financial obligations are on the decline, total consumer debt still exceeds $880 billion. One in ten consumers holds more than 10 credit accounts, and the average consumer carries 4 credit cards according to Experian’s National Score Index. The average household spends 16% of their income on financial obligations according to the Federal Reserve Bank of St. Louis. For ways to get rid of your debt I suggest getting a free debt plan from www.greenpath.com and implementing it yourself. They will try to sell you their service for implementation and, by all means, if you can’t do it yourself, use their service, but the point is to get out of debt. Another great resource is Dave Ramsey’s book Total Money Makeover. I read this book from the library before buying my own copy, which is currently out on loan. Mr. Ramsey systematically takes you through the steps to get out of debt. He should know how to do it as he went from average to millionaire, to bankruptcy, to millionaire again.
If you can lower your home (30%), Transportation (18%), and personal debt (16%), you could feasible live on less than half your current expenses. You can use your extra cash flow to save for future goals. When in retirement, if your house and cars are paid for, and you are essentially debt free, you’ll not need to save 10% to 20%, so your living expenses could be as low as 40% of your current expenses. This can be done with some careful planning as your approach retirement to ensure that you are debt free. The only caveat is that your healthcare is almost guaranteed to increase.