'Dieting' in Preparation for Retirement

How to slim down


At first glance, the diet industry and financial services industry seem to have nothing in common, other than being multi-billion dollar markets.

But they share a common goal: making consumers believe there’s an easy solution to issues that typically take time, focus, and determination. The problem with chasing the easy way is that it usually doesn’t work.

Too frequently there are quick-and-easy fads that claim dieters will lose weight without healthy eating or exercising habits. Similarly, there are always new financial products claiming to help investors reach goals with magically (read: unsustainably) high returns.

In other situations, diets and financial plans are too restrictive and impossible to maintain. Here’s the problem: Diets end, and people fall back on the unhealthy eating habits that led them to need the diet in the first place. Plus, the diet that helped someone lose weight rapidly probably wasn’t, itself, all that healthy. Likewise, the latest-and-greatest in investing products will have bad days or months. It could also have hidden fees or be structured to prohibit investing flexibility.

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There’s no magic diet, nor is there one single investment that will help you realize your hopes and dreams.

So where does that leave us? We can’t control external forces, but much of our financial and bodily health is in our hands. It’s time to stop looking for quick fixes and realize that healthy eating habits and retirement planning are lifelong pursuits that require continued attention and focus. There will be good times and bad, but one day or month won’t ruin everything.

Here are some tips to help you take control and improve your financial health:

Increase your savings. To do this, you need to spend more money on retirement (by putting it in retirement savings) and cut back on frivolous spending. It’s the financial equivalent of eating more fruits and vegetables while cutting back on fatty fried foods. You’ll have more money for retirement, assuming it’s invested the same as your current savings. Additionally, you’ll need to reduce the cost of your current lifestyle in order to increase your savings. Learning to live on less now means you might be able to live on less during retirement.

Establish short-term savings and retirement goals. When you want to lose weight, it’s easier to think about short-term goals. The same goes with your finances. If you aren’t working toward a specific goal, it’s easier to spend money on things you don’t need. Short-term goals provide positive reinforcement while you work toward longer-term goals, increasing the likelihood of you sticking to your plan. Focus on a fun short-term goal, like saving a specific amount of money for a vacation fund. Then divide retirement savings goals into segments in time, each reflecting the different lifestyle needs you’ll have at different points in your life.

[See Preparing for Open Enrollment.]

Don’t be discouraged by a slip-up. Even the health nuts among us will occasionally eat poorly, and everyone has periodic budgetary blunders. Learn from mistakes, and don’t let them derail your efforts. All too often, people allow missteps to hinder progress toward important goals.

Don’t overcomplicate things. At the end of the day, you need to eat fewer calories than you burn if you want to lose weight, and you need to eat healthy foods for long-term fitness. Similarly, you need to spend less money than you make if you want to build a retirement nest egg, and you need to select appropriate investments to grow your account in a healthy way. Creating complicated plans and running after “perfect” investments only increases the likelihood of making mistakes and quitting. Your retirement plan should contain an investment strategy that’s easy to use in your 401(k) account or IRA—a strategy that you can follow in good times and bad times.

If we set easy-to-implement plans and stop looking for easy-way-out quick fixes, we can learn to focus on long-term goals. That translates into more time to spend on interesting pursuits and less stress associated with long-term unknowns. All good things.

Scott Holsopple is the president and CEO of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal. Keep tabs on Scott on Twitter and Facebook.