5 Cash Flow Strategies for Accelerating Your Retirement
In financial terms, cash flow is the rate at which money comes into and goes out of your bank account. It also can mean after-tax income. This article assumes that cash flow is after taxes and expenses. The more cash flow you have, the more likely it is that you will be able to save enough and live comfortably during retirement. One metric we use, we call the cash-flow-to-spending ratio. Cash-flow-to-spending can be measured as a ratio to show how much of your current income is being spent each month. This metric provides insight as to how much you can save each month, and how long it will take for you to reach your goal.
For example, if you have $4,000 in monthly expenses and $11,000 in monthly income after-taxes, your cash-flow-to-spending ratio would be 2.75. This is a healthy cash-flow-to-spending ratio and shows that you are in good financial shape. Conversely, a low cash flow ratio means you are spending more than you might be able to afford. This can put you at risk of financial trouble.
Strategies to accelerate your retirement:
Here are strategies to help you reach retirement sooner rather than later!
The goal with these retirement acceleration strategies is to increase your monthly cash flow. This will help you build a stronger financial foundation, repay debt faster and save more money for retirement. Here are a few strategies you can use to increase your cash flow.
1- Review expenses and make changes where necessary
The first step is to take a look at your current spending. Are there any areas where you can cut back or make changes? Even small changes can make a big difference in your monthly cash flow. For example, can you switch to a cheaper cell provider? Can you cut back on your grocery bill by shopping for less expensive items or buying more off-season produce? After looking at your current spending, the next step is to figure out what lifestyle changes you are willing to make, and what can be made. Are any expenses out of control and need to stop immediately? What expenses can be scaled back? What expenses can be avoided or cut back on?
This is where a budgeting app with the option to track your spending and see what you can adjust is really helpful. You’ll have more data to help you determine what changes are possible and what will save you the most money in the short term.
2- Boost your retirement savings contributions
One way to help accelerate your retirement is by increasing your retirement savings contributions. This will allow you to have more money saved for when you do retire. Plus, if your employer offers a matching contribution, be sure to take advantage of that! It’s free money that can help boost your retirement savings even more; and you may be able to reduce your taxable income by contributing to a Traditional IRA or 401(k). So not only will you be building a bigger nest egg, but you’ll also be saving on taxes now.
Another important pointer, make sure to keep an eye on your investments. Monitor how your portfolio is performing and make changes as needed. Diversifying your portfolio can help reduce the risk of losing money if one of your investments underperforms.
3- Boost your income with side hustles or a part-time
If you want to make more money and retire faster, you can start a part-time or side-hustle business. Starting a side hustle or part-time business can be a great way to save for retirement. Just make sure you pick the right type of business. Then, set some realistic goals. These two things can help you bring in some extra money that can go towards retirement savings.
You could start a small business, like a consulting business or a home-based business.
No matter what you choose, make sure it is something you are passionate about. This will help you stay motivated and stick with it when things get tough. Make realistic goals and track your progress.
4- Consider downsizing your home
One way to accelerate retirement is to downsize your home. This can provide you with more income for retirement. Downsizing can also help you simplify your life and reduce your expenses. This will allow you to save more money and prepare for retirement.
If you’re thinking about downsizing your home, there are a few things to keep in mind. First, consider the cost of selling your home and moving. This can be a significant expense, so be sure to factor it into your plans. Second, think about where you want to live. Do you want to downsize to a smaller home in the same area, or move to a new location? This is an important decision that will affect your quality of life in retirement. There are many other considerations, and New Century Investments can help you decide.
5- Create a budget
When it comes to retirement, having a budget is key. Not only will it help you keep track of your spending and saving, but it can also help you increase your income for retirement.
By creating a budget, you can figure out exactly how much money you need to save each month in order to have the retirement fund you desire. And by knowing this, you can then start looking for ways to increase your income – whether through earning promotions at work, picking up a side hustle or earning extra income through investments. You can use our app to track expenses, or you may choose to use an excel file.
Simply put, budgeting for retirement is one of the best ways to ensure that you have the funds you need to live comfortably once you leave the workforce. So if you’re looking to retire sooner rather than later, start creating a budget today!
There are numerous strategies you can use to accelerate your retirement. These strategies will help you save more money and live more comfortably during retirement. Now that you understand the cash flow and the different retirement acceleration strategies, it’s time for you to start benefiting from them.
Take the Next Step
If you’re interested in learning more about how to accelerate your retirement, call us at New Century Investments. We have experienced CPA and CFP® professionals who can provide you with the holistic financial planning services you need. We offer tax preparation, investment management, tax planning, financial planning, retirement planning, estate planning, tax planning for entrepreneurs, and more. Call us today 817-238-6300 to learn more about how we can help you achieve your financial goals.
Matt Ward, CFP®