If you don’t think that starting to save for retirement at an early age is important, consider the following example: If you save $5,000 per year in a Roth IRA beginning at age 20 and assuming a 7% rate of return, you’re going to have slightly over $1.5 million at age 65. If you put this off for a mere ten years, that figure drops to $740,000. Now, $5,000 is no drop in the bucket, especially when you’re younger, but that doesn’t mean it’s impossible. Read on to learn how to create more money to devote to your retirement investing, starting today.
1. Reduce Your Housing Costs
If you rent, look for ways to negotiate a lower monthly payment. You could offer up your services to the property manager if you’re well-versed in minor home repairs or landscaping. If you do get a notice informing you of a rent hike, politely inquire if it might be waived – you could offer to sign a longer-term lease in exchange. If you happen to own a home, investigate refinancing options now. Rates are on their way back up and the time you have left to save might be limited.
2. Pay Less for Food
The number one way to cut your food costs is to start using coupons. Check out the Yowza app on your smartphone and pick up a few copies of the Sunday paper as well. Organize your coupons by food product rather than expiration date – there’s no sense in using a coupon for something you don’t need just because it’s about to expire.
3. Cut Your Home Energy Bills
Contact your provider and schedule a home energy audit. Put all the ideas you get in the customized report into effect and you can save a bundle on energy costs. In the meantime, adjust that thermostat and dress for the season – sweats and sweaters in the winter and shorts and tank tops in the summer. Run only full loads of laundry and dishes and unplug all appliances in your home that aren’t in regular use.
4. Adjust Your Purchasing Habits
Take a moment and ask yourself about the last five purchases you made. Chances are, at least a few of them weren’t necessary – think convenience store items and electronics upgrades, for example. Commit to categorizing all potential purchases as either wants or needs and seriously evaluate everything that falls into the “wants” category, then decide if you can go without it. Once your retirement savings are back on track you can relax these restrictions a bit, but only then.
5. Eliminate the Unnecessary
Avoid purchasing household cleaners and look on the Internet for ways you can make them yourself from ingredients already in the house. Drop your home telephone line unless it’s absolutely essential and if you haven’t watched HBO in a while, get rid of it and watch basic TV channels instead.
6. Use Your Spare Time to Generate Income
Once you’ve saved all you can, set aside some of your spare time for income generation. Unloading your closets and drawers of unneeded electronics is a good way to start. Sell them on Amazon, eBay, or Craigslist. Donate old clothes and other items you can’t sell to a qualified organization and get a tax deduction. You won’t generate money, but you can certainly save it. If you own a smartphone, do an Internet search for apps that let you generate cash, like FieldAgent, GigWalk, AppRewards, ScoopShot, and TaskRabbit.
Final Thoughts
Let’s say you wind up with an extra $500 for retirement after instituting these ideas. Make sure you invest it where it can do the most good. The first place to start is with your employer’s 401k program, especially if there’s a company match. If you have to wait until open enrollment to join, set your funds aside in a separate account so you don’t blow them on unnecessary purchases. Next, investigate the pros and cons of traditional and Roth IRAs. They have differing tax consequences, and either could be more beneficial to you depending on your situation. Start early and take the time and make the effort to save more for retirement. Once it comes time to call it a career, you’re going to thank yourself.
What ways can you think of for younger people to save more for retirement?
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