If you read a lot of financial articles online, you've probably grown tired of hearing that you need to save more money for retirement. While this is important advice, most of us have been told that we need to save between 10% and 15% of our income to be financially secure in retirement. The problem: Where do you come up with all that money? (For example: If you make $50k/year. Take 10% of that = Need to save $5,000/yr. Divide by 12 months = Need to save $417/month for retirement. At 15%, that number goes up to $625/month.)
If you're already struggling to save or you're living paycheck to paycheck, boosting your savings to the recommended level can seem like an impossible dream. Still, for most of us, there really are effective ways to find extra cash for retirement. Here are some suggestions on how to free up more money to invest in your future.
1. Dine out less often
The majority of Americans report the cash they wasted on dining out was their biggest spending regret. While there's nothing wrong with going out for a nice meal with the family on occasion, average spending on food away from home totaled more than $3,300 in 2017, according to the Bureau of Labor Statistics. That's close to $300 a month. If you opt for just one nice $100 dinner out instead and save the difference, the $200 per month you save would give you $2,400 extra to invest in a 401(k) – which could turn into a $271,000 nest egg when invested over 30 years at an 8% return.
To actually dine out less, prepare extra portions of meals when cooking, and freeze them for nights you don't feel like turning on the stove. Bring your lunch to work instead of buying, and opt for late lunches instead of early dinners out so your restaurant meals cost less.
2. Use coupons for everything you can
Coupons can save you a surprising amount of money – not just on groceries but also on in-store and online purchases of electronics, clothing, and more. Before you buy anything, do a search for coupons for the store you'll be shopping at or the items you buy. You can often find discount codes or printable coupons. For food and toiletry items, you can print coupons from the Sunday newspaper online to get the coupons you need without clipping.
There are free widgets like Honey that you can install in your web browser that skim the internet for promotions every time you go to checkout and pay for an online purchase.
3. Cancel unnecessary services
Evaluate how your expenses reflect your life's current priorities. Chances are good there's something you're paying for that's not providing you with any value. Comb through your online banking statements and credit card statements to find this money sucker and cancel any unnecessary subscriptions so you can divert the extra cash to retirement savings.
Are you paying for a gym membership when you could be walking outdoors or running on an office or home treadmill instead? Do you have four different video streaming services even though you really only use one? Are you still paying for a landline telephone you haven't answered in two years? Check your Apple account for any apps that are automatically renewing their paid subscriptions. Are you getting the most out of your morning paper or could you pay less for a digital news subscription? There are many places to cut back services when it comes to subscriptions, memberships, and fees.
4. Opt for older used cars instead of new ones
Cars have gotten more expensive, car payments have gotten bigger, and car-loan terms have gotten longer. As a result, many people spend nearly their entire lives paying back car loans. Instead, if you opt for a cheap used car until you can save up to pay cash for your future vehicles, then you'd save the money you might have spent on loan payments. This could net you hundreds of thousands of extra dollars saved for retirement. Having the coolest, newest car on the block simply isn't worth compromising your retirement security, and new cars aren't always a smart purchase due to their quick depreciation.
5. Reduce your energy consumption
Does your air-conditioner or heater run all day while you're at work and at full blast all night while you're sleeping? Are your laptop and cellphone plugged in all the time even when fully charged? If so, you're one of the millions of Americans wasting energy.
Installing a programmable thermostat to adjust your home's temperature while you're gone all day, or after you've fallen asleep could save you hundreds each year on your electric bill. Sealing gaps in your house where air leaks through and unplugging electronic devices that use phantom power could save you even more.
6. Buy used instead of new; search for discounts
Consignment stores, thrift stores, and the internet have all made it easy to find gently used clothing, sporting goods, baby items, toys, electronics, and more. With so many used items available, there's little reason to buy new items for most purchases – with the exception of mattresses, soft furnishings, and safety gear like high chairs and strollers.
So, before you put a brand-new item in your cart, look for a gently used version to save a lot on every purchase. And since older stuff is sometimes better made than the newer stuff, you may end up with an item that lasts longer. Try online options like Facebook Marketplace, E-Bay, Overstock.com, amazon.com/Bargain-Finds,
7. Look for free entertainment
Spending on entertainment is another huge line item in many people's budgets, but it doesn't need to be. Instead of paying to go out for a good time, find free alternatives. Concerts in the park, gallery openings, local hikes, and free kids' events are just some of the many no-cost activities you can find.
Check your local newspaper for a schedule of events, call your library to find out if there are kids' activities or interesting speakers, or plan free events yourself such as meeting friends for a walk or having a board-game night. You'll soon find you can have a great time while keeping more cash to save for retirement.
Just a few of these simple changes could make a big difference in the amount you have available to save for retirement.
For more advice on retirement savings, contact Stevie Swain at Stevie@swainconsultingllc.com.