Saving for the future is something we know we have to do. But, couldn’t it be a bit more predictable? I mean, seriously…what is that retirement account doing between checkups, anyway? It might not seem to be doing much (especially if you check it often), and there are also those times when it takes a quick dip.

In this post, I’ll share with you the 3 things anyone can do in their 401k to either start off right, or get back on track fast. If you’ve ever wanted to look at your 401k balance or investments and see it making progress towards your goals more regularly, then this post is for you.

First, let me tell you a quick story…

My wife is a first grade teacher. She’s really great at it. Me, personally? I wouldn’t have the patience for a group of kids like that. However, when I pay a visit to that classroom, I see 15-20 kids who each have their own thing going on. There are usually some who are talking, some who are listening, some who aren’t paying attention to anything but a picture on the wall or something on the rug in front of them… And when your job is to make sure everyone is learning the curriculum and will meet the academic progress standards at the end of the year, then any single moment of observation on the group might lead you to believe things aren’t happening like they should, and it even might look like the teacher has lost control of the situation. (Not in my wife’s classroom, mind you; we’re talking hypotheticals here. I love you, honey!)

What does this have to do with your 401k? I’ll explain.

What you or I see when we peek into a first grade classroom might look to us like things aren’t going well. But, that’s because our eyes haven’t been trained to see what matters and ignore what doesn’t. (If you are an elementary school teacher, please forgive me for suggesting that you don’t know what matters. Clearly you do, and I know you’re doing a fantastic job, so please keep it up. 😉 ) In your 401k plan, you might not know yet what to look for and how to keep score so you know what’s really going on, and that’s okay.

It’s not your fault because this isn’t your area of specialty. Let me break it down into three things that show you what’s going on and how you can know when to make adjustments.

1. Know where you’re going

This might sound pretty basic and even obvious, but it probably would surprise you to know that most people don’t know how much money they plan on spending in retirement and what portion of that will need to be provided by their 401k. This is certainly different for every person, just like vacation destinations and accommodations packages are personal to each vacationer. How can anyone know they will end up where they wanted to be with the comforts they were looking for unless they decided before they left? Your retirement “destination” is actually a dollar amount. A calculator will help you find your unique number.

2. Know which path you will take

Once the destination has been set, the route makes a lot more sense. For example, if you live in Ohio and you want to vacation in Hawaii, you probably know that booking a single flight to Seattle or Los Angeles won’t get you all the way to Honolulu. In a similar way, because different investment options perform differently over time, you’ll want to choose ones that will get you where you need to be. There are risk-reward relationships with these investments, and you don’t want to take on too much risk. The “right amount” of risk is unique to you. If you want some help, I use a tool called Risk Number(tm) to find your comfort zone and then choose investments that will keep you inside it AND get you where you want to go. Knowing the traits of your available investments and your final destination will help you find a match between the two.

3. Know when to adjust…and when not to

How many times has your GPS app informed you of a slowdown on the road ahead, then calculated whether it will reroute you, or whether you are still on the fastest route? How does it do this? It quickly gathers data from other motorists on other possible routes and compares the travel speed of those cars on those routes and compares the total time of those possible routes to the delayed time of your current route, and voila, you have an answer in 20 seconds. You can have the same thing happen when markets do weird things like drop in value. Having a tool that compares the other possible investments with those you’ve been using up to that point is critical. Otherwise, you might make a drastic mistake by deciding to change the investments…or by not changing them when you should.

Now, the other thing that no one likes to talk about is TIME. Today you have less time to have your money working for you than you did last month, and next month you’ll have even less. The decision in #2 above depends mainly on how much TIME you have left, so I recommend you start sooner than later especially if you don’t like taking big risks to try and catch up (and who does?).

If you want to have more confidence that you’re going to Retire Like A Boss, then join my mailing list so you don’t miss any of my informative posts. If you’re way behind in “planning your destination” or “choosing a path” and want to get on track sooner, you can email me at jeff@jmhill.us, or you can check out the 401k Toolkit. There are also some resources you can use right away in the right sidebar.

Did this post help inspire you to take another look at taming your 401k? If so, would you do me a favor? Please leave a comment below and tell me about what you’re planning to do after reading this post. I read every one, and I know others will too.