How To Afford a Retirement Account
Let’s be clear: I could care less about retirement.
With my rugged good looks and incredible personality, why would anyone want me to quit working with them? I’d much prefer to do what I love (writing here once a month) until I die.
BUT that doesn’t mean that I’m saying bye-bye to financial independence. If I decide to tell the overlords here at ADP to shove it, I want the ability to push that big red button tomorrow.
That’s why I choose to “afford” a retirement fund.
I’ve been told over and over during my career that people can’t “afford” to put money toward retirement. There are bills today, child expenses, work-related costs…fires that need to be put out right flippin’ now. A retirement account will have to wait, they say.
But affording retirement is easy if you examine your priorities. Instead of dreaming about that shiny new thing or even that “I have to have this for my job” thing, you have to instead want financial independence even more. As my friend LaTisha Styles at YoungFinances mentioned on our Stacking Benjamins podcast, you have to realize that shopping today doesn’t help as much as saving for tomorrow.
A cool side note: once you start saving, whether you think you have a saving “gene” or not, you’ll find yourself rolling faster and faster as the successes start piling up.
If you want to start saving into a retirement account, here’s what you do:
1) Focus on why. Most people in America (and elsewhere, for that matter) work in jobs they don’t like doing things they’d rather not do. Why stay there a day longer than you have to? Instead, plan out what your ideal day would look like if you didn’t have to go to work. Realize, that the idea of “doing nothing” might sound awesome right now, but that’s not a recipe for longevity. On our Stacking Benjamins Short Stack podcast, we shared a story about a researcher at UCLA who discovered Catholic Nuns live longer than most of us because they have important work to do….forever.
2) Compare that long range goal with today’s purchases. That new shiny dongle for your office today probably seems awesome until you compare it with that trip around the world later. Flip through a few “dream” photos of your hoped-for Kenyan safari or Tuscan sunsets and you’ve fought half the battle. From there, you’ll find that you don’t want the dongle as much anymore.
Any time I get to use the word “dongle” in an article, it’s a little win.
3) Make it automatic, baby. A woman I’ve been working alongside on a project wrote me the other day about the power of a due date. I don’t know about you, but nothing forces me to pay bills more than their due date. If I turn my retirement savings into a bill, I’m far more likely to save than if I just tell myself that I’ll do it. Writing that check every month never happens.
Side note: People have told me over and over that “I don’t need to set up my savings on automatic pilot. I’ll remember jto write a check every month. In fact, they’d assure me that there wouldn’t ever be a problem with their way of savings. I can’t remember one instance where writing a check was ever a good strategy.
Still Can’t Afford A Retirement Account? Read On….
For most people, those three steps enough are enough to begin the saving wheel. But we all know someone who has bigger problems and is going to need to cut to finish the job.
Maybe that’s you. If so, I’ve been there.
For those people, my job was to help them wheel their budget into surgery and find new savings. Steal any of these biggies:
1) Phone/television packages – We reliably found money by restructuring phone and television/cable packages. This was an easy way to free up $50 to $100 per month.
2) Debt restructure. If someone has debt, we’d see if there were ways to create savings. Often, someone could refinance their home to a lower interest rate loan and also free up money to save today. If you refinance debt and don’t automatically save some of the money, you’re destined for more debt down the road.
3) Tax refund. If you’re going to waste your tax return on non-goal oriented activities, why not change your workplace withholding to automatically save into your 401k plan or an IRA? In some cases, my clients had tax returns of over $5,000. That’s a healthy Roth IRA contribution.
4) Meal plan. Be honest: maybe you eat meals at restaurants WAY more than you tell people you do. Otherwise, why are they packed throughout the day? Also, many North Americans are wasteful with groceries. By planning exactly what you’ll eat for each meal you can grab control of your costs fairly quickly and often free up significant money for retirement. A meal plan slashed over $300 per month off of our spending personally. I’ll bet it can do the same for you. (And, by the way….it’s fun to plan your weekly meals.)
5) Use utility plans. This one won’t save you as much money, but here’s how it works. Some people can’t save because their expenses fluctuate too much. A successful budget works because you can plan to shove more money into the savings bucket. By switching to a utility plan, your bill will stay level most months and then you’ll make up the difference or have a smaller bill once a year (or other interval….check with your area’s utilities for details).
On that note, examine all of your spending and see how much fluctuation you can remove. As you level out your spending, you’ll find the amount you can reliably save rises.
That’s it! Hopefully you’re on the retirement plan savings wagon.
How much should you save toward retirement? That’s a topic for another day! #keepthemwantingmore
Here’s where you can help: how do you save money? Let’s throw in some more ideas on how to “afford” retirement plans in the comments. Thanks!
Joe Saul-Sehy is the incredible talent behind StackingBenjamins.com and enjoys spending as much money on lattes as possible as he builds wealth.