Earning Too Little to Save for Retirement

Jeff Rose

When you're first starting out on your own, it can be difficult to feel as though you have enough money to save for retirement. Many people have the misconception that they need to have a certain amount of money to start saving for retirement.

If you feel like you don't earn enough money to save for retirement, it's time to change your mindset. Here are some things you can do to free up some of your money so that you can get started on saving for a better financial future:

Open an account and start saving something. The best thing you can do for your retirement, especially if you are young, is to open a retirement account and start saving something. Anything you save can be a help down the road. Open your account and just get started. Even if you can only set aside $15 a week, start saving that. Over time, compound interest will do its work.

It's true that you probably won't be able to retire comfortably from the returns of $15 a week. However, it will at least get you started. Saving something is always better than saving nothing. The important thing is to begin saving, and get in the habit.

Prioritize your spending. Once you are putting something into a retirement account, it's time to start looking for ways to boost your contributions. One of the best ways to do this is to prioritize your spending. You might be surprised to learn that you have more money than you think.

Track your spending and watch where your money goes. Are you wasting money on things that aren't that important in your life? If so, make a few cuts and then put the money toward your retirement savings. There's a good chance that, once you actually make saving for retirement a priority, you will be able to find more money in your budget to put toward that goal.

Make more money. As you make more money, you can increase your retirement account contributions. Try selling a bunch of stuff you no longer use and making a one-time extra contribution to your retirement account. You can also start a small side business and put the money toward your retirement. Anything you make above and beyond your regular income can be used to boost your retirement account contributions.

As your career progresses, and as you begin making more money, make sure that you earmark a portion of your increase for retirement account contributions. Rather than spending all of the increase on a new car or on upgrading your lifestyle in other ways, take at least half the increase (more is better, though) and put it toward your retirement account. You'll build your nest egg without downgrading your current lifestyle.

Grow your assets. You can make the most of your retirement investment dollars by growing and protecting your assets. First of all, if your employer offers a match, make sure that you contribute enough to obtain the maximum match. Then, check into fees and investment choices. Do your best to choose accounts and funds that come with low costs so that your returns aren't eroded by high fees and expense ratios. Also consider holding dividend-paying stocks in your retirement portfolio. You can automatically invest the dividends so that your nest egg grows at a faster rate.

With a little planning, anyone can begin to build a nest egg. You can make the most of your retirement investment dollars, even if you have to start small.

Jeff Rose is a certified financial planner and U.S. combat veteran. He blogs at Good Financial Cents and Soldier of Finance.

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