Setting up a plan for retirement and opening the appropriate investment accounts is only part of the equation. Like most long-term goals, consistency is key, which includes contributions to your investments. As your income grows, so does the temptation to increase your spending. This “lifestyle creep” can erode your retirement savings. The key to financial discipline is living within a set budget even as your income grows.
While impulsive spending can derail your plan, budgeting for fun activities can help keep you on track. Find a balance between saving for the future and enjoying life today to ensure you stick to a budget for the long term. A common way to divide income is the 50/30/20 rule: 50% for necessities, 30% for wants, and 20% for savings.
The 50/30/20 approach allows you to invest in both your current happiness and your future security. Automating the transfer from savings to investments can also help keep your financial goals on track and help you avoid succumbing to impulsive spending.