Saving money is tough. In a world where a gallon of gas tops $4.00 and a trip to the movies can exceed $40.00, it’s no surprise that Americans aren’t measuring up when it comes to retirement planning. Beyond the high cost of living, the stress and uncertainty of saving can be daunting. The future is abstract and you may not understand just how much it costs to quit working and live comfortably after age 65. If you feel like giving up before you start, consider this fact: Saving as little as $5.00 per day could help you retire early. That’s right, saving as little as $35.00 per week could add up to hundreds of thousands by retirement age. The magic of investing is compounding interest, allowing your savings to grow at a greater rate over time. $5.00 a day in savings equals $1,825 per year. This number may seem high, but tackling your savings is affordable, weekly installments will help you succeed without putting a strain on your budget. Not convinced? Take a look at the table below to see the potential rewards of saving $1,825 per year.
|Years of Saving||10% Annual Return||8% Annual Return||6% Annual Return||4% Annual Return|
Values based on $1,825 per year of savings, assuming a three percent inflation rate and a taxable rate of 15 percent.
You’re probably reaching for your checkbook by now. Keep these tips in mind as you move forward and learn how to save wisely:
- Find that extra $5.00 per day by curbing your daily convenience spending, e.g., Starbucks orders, dining out for lunch, etc.
- Use direct deposit. The average employer offers direct deposit on payday. Ask your boss to channel your $35.00 per week savings into your investment account, allowing you to save without being tempted to spend.
- Consider the future. The average retiree needs 80 percent of their last paycheck amount to survive. If you plan on retiring for 25 years and earn $65,000 per year, that means you’ll need at least $52,000 for every year of retirement and at least $1.3 million to live for 25 years. As you can see, saving $5.00 a day isn’t likely to cover your expenses. Talk to a financial planner about your retirement savings. Enroll in a long-term plan that matches your risk tolerance and get serious about saving for the future. Saving can be challenging with a working wage, but it’s far easier than facing an empty bank account at age 70. Avoid the need for credit repair in the future—it’s never too soon to start planning.