Dave Ramsey Says These Money Habits Could Stunt Your Retirement After 50
Planning for retirement isn’t just about saving money. It also includes putting a plan in place to ensure you don’t blow through that money too quickly once you save goodbye to the workforce.
Personal finance guru Dave Ramsey refers to each person as the CEO of their retirement. Developing strong money habits as soon as you can will help ensure that you don’t hurt your retirement savings once you’re in your 50s, 60s and beyond. Here are three behaviors Ramsey says could set you back.
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1. Treating debt payments as 'normal'
Debt can be a key piece of a financial journey, such as a mortgage to buy a house or student loans to fund your education. But building up high-interest debt like credit card debt — and not focusing on paying off your debt in general — can chip away at your savings.
Ramsey is very debt-averse. He says that people should avoid debt as much as possible, and pay it off aggressively should they accrue it. Debt can make sense for some people’s plans, but a piece of advice you can glean from Ramsey’s approach is to not view debt payments as just a normal part of your budget. You shouldn't get used to making the payments so much so that you aren’t focused on paying that debt off.
Ramsey believes people should aggressively pay off debt and that retiring with any of this type of debt can ruin their golden years. He says the best way to approach debt if you have it is to pay it off as quickly as possible, and become debt-free before retiring. That way, you have fewer expenses to worry about and are more prepared for any surprises.
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2. Lifestyle creep with no written plan
Costs tend to climb over time, but some retirees may still be shocked by rising expenses that take place during their golden years. Home upgrades, frequent travel and impulse spending can increase monthly expenses if you aren’t careful, and some people spend so much money during retirement that their nest eggs get stretched too thin.
Ramsey regularly suggests creating a detailed budget, living below your means to avoid lifestyle creep and avoiding reckless spending. Every unplanned dollar you spend is another dollar that can’t work toward your retirement and compound in a portfolio.
3. Procrastinating your savings and having false confidence
Retirement planning is a long-term process, and saving it for right before you’re ready to step back from work can leave you financially vulnerable deep into your golden years. Expecting to rely solely on Social Security with no strategy for developing supplemental income, not maxing out your retirement accounts and getting deeper into debt can have consequences.
Ramsey says that saving for retirement shouldn’t be complicated, but it should be consistent.
He suggests saving at least 15% of your gross income — that is, your income before any taxes are taken out.
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