Everybody knows the importance of saving money, but it can seem impossible for many families who live in one of the most expensive cities in the country.
Charles Baker agrees. The North Park resident moved to San Diego from Los Angeles years ago, and, since then, spent the money he had saved up in his 401K. Now that it's, he feels he's not ready to retire, despite being 67.
“I’m not going to retire," Baker said. "I can’t afford to retire — that’s just the truth."
Baker said he never learned how to save money, and, now that he has hit retirement age, he wishes he had a do-over.
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NBC 7 Responds talked with a local financial planner, Paul Lim, who said that, in most cases, saving is less about the numbers and more about the mindset to save money on even the tightest budgets.
Lim, who is a certified financial planner who volunteers at the Financial Literacy Center in San Diego, said saving for the future requires a business-like mindset.
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“So your revenue is basically all of the earnings that you make," LIm said. "Your overhead, the cost of doing business, is the lifestyle that you need in order to be just happy enough to be able to go back to work and continue doing what it is that you’re doing. The surplus that’s left over, what’s left over after you cover all your living expenses, that’s your profit margin."
Lim added that the profit margin is your savings, and is at least 10%, but, ideally, 20% if you can pull it off.
“You’re treating your savings for your future as important as paying for electricity, your rent or mortgage," Lim said. "It's part of your bill and you must see it that way.”
After getting disciplined regarding saving, you'll need to crunch the numbers to get that savings sweet spot. There is the 50-30-20 rule: 50% of household income should go to necessities, 30% to wants, and 20% to savings. This is a goal, so there’s nothing wrong if you’re not there yet.
Lim said that, while it's optimal for a third of household income to go to housing, there may not be anything available in San Diego at that price.
“If it means taking on a roommate or maybe moving out to an area that’s not as nice as we would like," LIm said, than that's what should be considered, pointing out that "everyone wants to be near the water.”
The financial planner also said people should cut out unnecessary spending, see if there are any streaming services that can be discontinued and cook more often. There are many small ways to save that can add up, including taking a second job and turning that extra income into your savings.
“You can almost earn your way out of every problem by taking on another source of income, maybe doing something that you love,” Lim said.
Also, don't forget to look into your company’s 401K plan and contribute as much as it will match. By putting in the work now, retirement will hopefully run smoothly.
