One of the biggest mistakes that many people make concerning their finances is believing that they don’t earn enough income to start saving for retirement. Many people are under the false assumption that there is a certain ‘magic number’ that needs to be made, earnings-wise, before they can start thinking about taking some of that money and putting it aside for the future.
This is not only a false assumption but a dangerous one because there will inevitably come a day when even the brightest and strongest of us won’t be able to work anymore. If you haven’t saved anything for retirement you’re going to have to put your faith in either the government or the goodwill of others and, we don’t know about you, but we’d rather have enough money to make our own decisions thank you very much.
The good news is that, no matter how much money you’re making, there are still ways to start putting money aside and letting the power of compound interest work for you. Simply put, if you don’t think you earn enough money to save for retirement it’s probably time to change your mind..
This may seem obvious but if you’re going to start saving for retirement the first thing you’ll need to do is start some type of retirement account. As obvious as that sounds however, the vast majority of people who are surveyed will tell you that they don’t have any type of retirement account open even though they want to save for retirement. That’s kind of like saying that you want to fly to Paris for vacation but you don’t want to buy the airline tickets. Without some type of account there’s really no way that you will ever be able to save any sort of substantial amount of money. (And no, keeping change in a 5 gallon bottle in your closet doesn’t count.) Talk to your banker and get advice about your options and do as much online research as you can to find out what types of plans are open to you, and then open one.
Once your retirement account, no matter what type it is, is open you should start putting money into it on a weekly basis. Even saving $15-$20 a week is better than nothing to get into the habit of putting money into your retirement fund. If you have a few dollars extra at the end of the week put that money into your account also. This won’t add up to much at first but, over time, the amount will grow as well as the effect that compound interest is on it. As silly as it seems, just opening some type of retirement account and putting a little bit of money into it every week means you’re doing more to safeguard your future than over half of the population.
Once you’ve gotten into the habit of putting money into your retirement account weekly it’s time to look at other ways to increase the amount you put in. One of the best of the bunch is to prioritize your spending. This of course means starting and using a budget so that you can track your spending and see where your money is going. (We have tons of blogs about budgets and budgeting. Just FYI.) If you see where your money is going you can cut back on a lot of things that are wasting your money, such as $10 a day for Starbucks or $12 a day for that nasty fast food lunch. Once you see how much you actually make (and how much you waste) you’ll be able to start cutting back and using that money to fund your retirement nest egg.
When it comes right down to it, it’s simply about making your retirement savings account a priority in your life. We realize that it’s a lot harder to do when you’re younger or when you’re just scraping by but, on the other hand, many people who are ‘just scraping by’ are wasting money on things that aren’t nearly as important. (And let’s face it, we’re all pretty silly and frivolous when we’re younger.) If you care about yourself, care about your spouse and care about your family then making your retirement savings a priority shouldn’t be a huge leap to have to take. Even a young adult with a little common sense will see that, in a mere 40 years, they’ll be facing retirement as well.
The fact is, some of the best prepared retirees that we’ve seen started planning their retirement right after they finished college.
We humans can sometimes be a silly bunch. We spend money frivolously when we’re younger and then have to scrape by when we’re older, the sins of our youth coming back to haunt us. But it’s not all bad news because if you start as soon as you can (like, today) you should have at least a little bit of cushion by the time you reach retirement age. If you really make an all-out effort you may just retire with enough money to live quite comfortably and not have want for anything.
Even if you don’t make a king’s ransom, if you make saving for retirement a priority and start small, you can set yourself up to really enjoy your golden years. All it takes is a little effort and a lot of compound interest. See you back here soon.