Dave Ramsey has a simple and blunt rant: Normal is broke! If you want to retire with a decent nest egg, you have to do things differently than others.

Most people do not budget. They do not establish goals. They don’t watch their spending. They live paycheck-to-paycheck. They rely on credit cards for routine purchases.

These are the people who will also have to rely solely on Social Security in retirement because they didn’t make small, meaningful changes to their finances when they were you.

Don’t let that be you. Here are seven reasons that will cause you to be broke in retirement:

1. Living Without a Budget

A budget guides your spending so that you can grow your savings.  You will never achieve your financial goals without a budget.

Budgeting does not have to be a four-letter word. Here’s a simple overview:

  • Figure out how much money you have coming in each month
  • Add up all of your bills and expenses (including housing, food, transportation, clothing, loans, and credit cards)
  • Create a plan to pay bills, eliminate debt, and grow savings

2. Spending Too Much 

Many people think spending money lowers their stress. This isn’t true. It’s more of a numbing of the stress. In the long run, retail therapy leads to more stress.

Plant seeds for enduring happiness by choosing to spend your money responsibly. 

Create a budget and start tracking your spending.

You will notice how easily money “leaks” from your bank account on random, “inexpensive” purchases. When you track where your money goes, you will position yourself to spend it more wisely.

3. Going Further into Debt

Credit card debt is dangerous because it accumulates painlessly. The minimum payments are attractive and affordable. $25/month is nothing. 

But then one card gets maxed out. And then another…

Before you know it, credit card debt has snuck up on you, and the interest makes it difficult to pay down the balance. 

If you have a home, student, or auto loan, create a plan to pay off that debt and quit paying those interest charges.

The best way to get out of credit card debt is to budget. Spend less than you earn and put all of your excess towards debt. You want to be debt-free when you hit your retirement years because debt will just suck your savings. You want to be living debt free with a big savings in your golden years. Start now.

4. Waiting Too Late to Start Investing

When we don’t have a plan for our money, it becomes difficult, if not impossible, to save and invest for retirement.

A budget allows you to gain control over your finances. When you can keep income over expenses, you have money to invest.  

The power behind investing is compound interest: Your investments earn interest, and then that interest earns interest. The longer you invest, the more time it has to earn you money. 

Time is the best thing to maximize compound interest, so you do not want to wait to start investing. Start investing today.

5. Not Taking Advantage of a Company 401(k)

One of the best ways to invest is to contribute as much as possible into your company’s 401(k) plan. Sometimes a company will match dollar-for-dollar what you invest, and sometimes they will give you a 50% match.

It can take a number of years for your investments to earn a 50% return, but it can happen instantly when you participate in your company’s 401(k) plan. So, max out your contributions.

6. Withdrawing Retirement Funds Too Early

Our government gives us tax advantages when we save for retirement. That’s the carrot. There are major penalties when we withdraw our retirement funds early. That’s the stick.

On the surface, borrowing money from your retirement plan seems like a good idea. Don’t fall into that trap. Some retirement plans will not let you contribute until the loan is paid off. You will pay off the loan with after-tax dollars. The loan might also contribute to poor spending habits.

Do yourself a favor and do not withdraw your retirement funds early and do not borrow from your retirement account.

7. Not Having a Plan for Your Retirement

A budget will help you grow your savings every month, but you will need a retirement plan that will sustain you financially when you exit the workforce.

You want to invest as much as you can to give you a bigger cushion and to leverage compound interest.

Don’t let retirement catch you by surprise and do not rely solely on Social Security. Start planning today for a successful retirement.

UP NEXT: THE 7 TERRIBLE HABITS THAT ARE KEEPING YOU BROKE

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