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You're facing financial strain, and it’s overwhelming. Not because you're indulging in unnecessary purchases, but because you have bigger financial aspirations. You want to save. You wish to fully contribute to an IRA or 401k every year. And you definitely don’t want to survive on instant noodles when you retire. So, what should you do?
Here are three simple strategies to help you save for retirement — even if you're on a tight budget.
This article was originally published on MoneyNing.
Start Small
I had never been part of an employer-sponsored retirement plan, so when I decided to open a retirement account, it was entirely on me. Initially, I believed I needed at least $1,000 to set up an IRA. I started saving in a regular account, hoping to reach that amount. But it felt like it was taking forever, so I eventually gave up.
A few years later, I had gained more knowledge. I did some research and discovered that I could open an IRA with just $10, and there were no mandatory monthly contributions. I was overjoyed.
I opened an account with Betterment, beginning with $50, then set up an automatic monthly withdrawal of $100 from my checking account. But you don’t need to start with that much. Many brokerages let you open an IRA with as little as $10. And the monthly contributions? It’s entirely up to you. If $10 per month is all you can manage, then that’s perfectly fine.
Don’t be fooled into thinking your $10 per month doesn’t matter. The reality is that even small amounts add up over time. And just as important, you’re building a solid financial habit.
Just take the plunge. Contribute whatever you can each month.
Add Your Windfalls
You know those unexpected financial boosts you get each year, like tax refunds or work bonuses? Put them to good use by adding them to your retirement savings. Since you weren’t relying on this money to cover your living expenses, it won’t hurt to save it.
And don’t forget about overtime! Even if it’s just an extra $20 on your paycheck, set it aside; that money will accumulate over time.
Increase Your Contribution Each Year
Every now and then, raise your retirement contributions by a specific percentage. Gradually increasing the amounts you add makes parting with your money feel less painful. If you're starting with very small monthly contributions, consider increasing them by 20 to 30 percent annually.
If that's too much, try increasing by five or ten percent — just do what feels right for you.
Don’t believe the myth that you can’t start saving for retirement if you don’t have much to work with. It’s simply not true. Instead, focus on making the most of what you have and work towards improving it over time.
After all, millionaires are made $10 at a time!
