It doesn’t matter how old you are, you should be saving for retirement. Whether you are a 15 year old with a summer job, or 55 years old and have nothing saved, you should be putting aside money for your golden years. Retirement budgeting is not the easiest thing to do. However, as long as you’re earning money, you should be saving. After all, the earlier you start, the better off you’ll be.
The focus of this article is to show you some tips that can help anyone contribute more to his or her retirement account. The more you can sock away, the more earning power your retirement funds will have. Even just a few extra dollars a week will yield results.
Retirement Budgeting – Start Small
Here are some starters that shouldn’t have a major impact on your daily or weekly routine:
Brown Bag It – Do you hit up Starbucks every morning? How about lunch at the office cafeteria? From a financial standpoint, that’s wasted money. Invest in a good insulated coffee mug and brew your own java each morning. Bring your own lunch (even once or twice a week).
Buy in Bulk – You can find some great deals at Big Box stores on things you use regularly. Pay close attention to the “price per unit” number to see if buying in bulk is worth it for a particular item.
Ditch the Paper Products – As a society, we are notorious for being lazy. This includes household chores like washing dishes and doing laundry. You can save hundreds every year by ditching the paper plates, cups and towels. Plus, it helps the environment, too!
Couponing – Mobile apps have made couponing much easier for everyone. It doesn’t matter if you’re saving 25 cents on bread or $50 on a new TV, every bit helps. Most grocery stores have gone digital with their coupons. No need to clip! Further, there are tons of websites dedicated to saving you money. RetailMeNot is a personal favorite.
Related: Importance of Investment Diversity
Now for Some Bigger Savings
Fees – Always know what kind of fees you’re paying for any service you have. This can be retirement accounts, credit cards, online payments, ATM withdrawals, whatever the case may be. Research how and where you might be able to save money on fees. The amount you pay monthly in fees can drastically be reduced with a little shopping around.
Limit Monthly Recurring Expenses-With expenses on the rise and salaries stagnant, it is always a good time to reassess living expenses. Cutting monthly spending helps you to save money and earn interest. If you’re keeping your money in an interest-bearing account, it might be beneficial to keep your money if your landlord is willing to wait. Monthly cell phone, internet, and utility bills may be negotiated as well.
More easily adjusted, though, can be discretionary purchases. Clothing items can be mended instead of replaced, shoes can be resoled in many cases, and friends are often open to a clothing swap since they will benefit as well. Entertainment costs can be limited, especially during quarantine, since there isn’t anywhere to go anyhow. Stay home, pop some popcorn, and indulge in a movie on a free streaming service or something you already subscribe to.
Cut up those Credit Cards – Speaking of credit cards, do you really need them? The high fees associated with CCs make them a financial road block. If you use them regularly, then you’re probably living above your means. Cancel them, pay them off and be more frugal with your spending.
You Don’t Always Need the Best – You don’t need the brand new iPhone or Galaxy every year. Buy a used car instead of the latest model. Does anyone notice your designer clothes? Think of how much money you could save if you didn’t buy the latest and greatest.
Listed above are just a handful of ways to save money. Now, we’ll tell you how to budget those savings towards retirement
Set a Budget – Now that you know where you can save some money each month, it’s time to set a budget and stick to it. First, you need to figure out your monthly expenses. These can include: rent, car insurance, phone, internet, utilities, groceries, entertainment, etc. If all your expenses total $4,000 per month and your take-home pay is $5,000, you have $1,000 leftover to dedicate to other things, like retirement. The hard part is sticking to your budget!
Where to Save? – Now that your budget is on track, it’s time to determine where to contribute. Generally, your first option will be your workplace plan (typically a 401(k) plan). If offered, you should try to contribute enough to receive the entire match. The average 401(k) match is 50% of your contributions up to 6% of your annual salary. A Roth IRA is a great option to help diversify your savings. Roth plans allow for tax-free withdrawals during retirement. A Traditional IRA is another option if your job does not offer a retirement plan. They offer tax-deferred savings and upfront tax deductions (similar to a 401(k) plan).
Automate – You can’t spend what you don’t have. Therefore, if your retirement contribution comes out before you get paid, you won’t be tempted to spend it elsewhere. Just remember to adjust your budget accordingly.
Bonus Money – If you get an annual bonus from your job, it’s a great opportunity to boost your retirement savings. However, that’s not the only bonus you might see in a given year. Getting a tax refund? Bonus! Paid off your car? Bonus! Your son or daughter moved out? Bonus! All this bonus money can help you contribute more to your retirement.
Retirement budgeting is important at any age. The sooner you start and the more you contribute will make it that much easier to retire. Nobody wants to work forever! Follow these simple steps to make it a little less painful. Start small, but aim to contribute more every year. The more financially stable you are, the more you can afford to save.
Live by the adage, “Pay yourself first”! You must be proactive when it comes to saving for retirement. The government has given us the vehicles to encourage us to save, however you are in control of what and when to save.
If you have any questions about saving for retirement, feel free to contact us @ 800.472.0646.