Budgeting enough monthly money to save for retirement is not only for those who make more than $50,000 a year. In fact, even for people who make an estimated to $30,000, financial advisors believe they still can save enough money for a comfortable retirement fund.
How to Save For Retirement?
The key to saving, regardless of what it is for, resides within not letting your low salary dissuade you from starting a small savings account. Even if it is a tiny portion each month, it is possible to save enough to have a secure retirement.
1. Start Early
While there is nothing wrong with splurging every once in a while on a trip, night on the town, or shopping spree, the key to saving a sizable nest egg is to start setting aside money at as early an age as possible.
Something as small as $50 per month can create a substantial nest egg. If invested properly, individuals can have a return of 6 percent which sizably increases any saved money.
For those who do not want to be working their entire life, saving as early as possible allows for an earlier retirement. Waiting until a higher paying job or in a more financially secure time of life results in less return investment equaling less money in the long run.
4. Eliminate Debts
Before worrying over retirement, the first priority should be removing debt from monthly finances. Because of interest rates, debt will eat away at every bit of savings an individual has.
Kevin Gallegos, vice president at Freedom Financial, sums it up, “Your interest rates on credit cards are going to be greater than any interest you get from your savings. Get rid of your debt, then start saving.”
The same goes for student loan debt, car payments, etc. While short term loans like TitleMax might be helpful in an extreme situation, it is best to pay these off prior to opening your savings account. Getting out of debt might feel trickier than saving for retirement, but being debt free is worth any budgeting, side jobs or other measures you take.
3. Take Advantage Of Tax Credits
The IRS offers Savers Credit which is worth up to $1,000 for individuals or $2,000 for couples. Low-income earners, who contribute to IRAs, 401(k) plans, or other workplace retirement accounts, can claim this credit.
2. Be Diligent About Savings
Low-income earners need to prioritize their savings. With a smaller income coming each month, you might need to be diligent about where extra money is going in order to save.
This may mean forgoing indulgences such as paying for a morning latte, eating out at fast food joints or restaurants, and learning how to purchase only the necessities for your family. Although it is natural to want to have the latest and greatest, having your cake and eating it too (in retirement) is not always realistic. Small sacrifices now can create a huge payoff later in life.
1. Extra Money To Your Advantage
Instead of spending extra money from a tax refund or investment, put money away into savings. When you are able to retire earlier, you will be grateful you saved the money instead of spending it on frivolous expenditures. That said, it is important to find a healthy balance between enjoying life and vacation times as well as remaining frugal.
No matter how much you earn annually, as long as you are diligent, you can start saving money for retirement.