How to Save Money for Retirement

I’ve put together a few ideas I’ve found in the last few years to save money. But, before I get to the list, I want to give you some inspiration. Hey, if you’re anything like my wife, you’ll want to know that any sacrifice or compromise you make is going to be worth it. I’m also not going to spend an hour to save $3.

Have you ever done the math on that saying? When you earn a dollar, you have to pay federal and state taxes and Social Security contributions. Earning more can also make a big difference in many tax deductions and tax credits. It can also disqualify you for educational grants, public and private services, and utility discounts. Everything considered, a dollar saved is worth at least 20% more than a dollar earned. It might sound petty to some people. But, would you rather wash more of your laundry in cold water or spend a few extra hours at work each month? Saving $6,000 per year is like earning $7,200... without having to deal with the boss.

Changing your entire home to energy efficient lights should cost about $100 to $120. Most people will notice at least a $10 difference in their monthly energy bills depending on their schedules and habits. That means that you’ll double the amount you invested in less than 2 years and you won’t even have to pay capitol gains! Again, it might seem pathetic to some people. But, it ends up beating the performance of the average mutual fund or retirement account twice over. Eat your heart out, Warren Buffet!

Investing in things like energy efficient windows and insulating your water heater and air ducts can make a big difference in your monthly bills and doesn’t require you to change your lifestyle. This brings me to my next point.

The average American family can save $6,000 per year with small, reasonable changes. Of course, everyone has their own idea of what is “reasonable.” But, the most valuable idea I can share with you is to take a second look at your perspective of what is reasonable. Cutting out other things like insurance policies that overlap and extended warranties can be painless ways to save money.

Unless you’re in the middle of a severe financial crisis, you should never make compromises to your lifestyle that leave you feeling unsatisfied with your life. Don’t let anyone tell you that you don’t deserve your dream vacation, those $300 pair of Italian shoes, or season tickets to [insert your favorite team here]. But, you also deserve to live the rest of your life without that nagging feeling that you should be saving more money for your retirement. You also deserve to enjoy the last 20 years of your life in dignity; without having to sell your home to pay for nursing care in a room of a retirement home. It is realistically possible to have some of the best of both worlds.We just need to consciously choose what we will enjoy the most throughout our lives and direct our money to realistically reach those goals.

My advice is to weigh the cost/time-enjoyment ratio of the things you spend your money on. Why spend your money on things you enjoy a little right now when you can spend them on things you’ll enjoy a lot more later? The point is to look at the big picture to figure out where your money should go so that you can live a truly satisfying life.

A few reasonable lifestyle changes can allow you to invest a lot of money every year. If your changes allow you to invest $6,000 per year from ages 30 to 65 at 9%, you will have almost $712,000 (inflation adjusted) for retirement. That’s possible if you live your retirement years on about $36,000 per year until you are 95 (if your investments average 6% after you retire). Of course, I didn’t include Social inSecurity benefits.

With that perspective in mind, let’s look at a bunch of ideas that might even out that cost/time-enjoyment ratio. The first column is the change you make. The second is the monthly estimated savings for the average American household. The third column is what you would have if you invested the money you saved at 9% from the age of 30 to 65. The last column is how many years you could live in retirement if you invested it under the conditions above. It gives a compelling perspective.

I know. You’re probably thinking that’d work great if you were disciplined enough to actually invest it instead of spending it. Guess what? It’s not that hard. You make a few phone calls and appointments to find a financial adviser that is more interested in helping you understand the investments than getting the ‘sale.' Next, you set up an automatic withdrawal from your bank account on payday(s). Come back and check on your investments every year and that’s it. Seriously, that’s it. No monthly budget required.

Yes, you do have to spend less than you earn (live within your means) for this to work. That’s a lot easier to do if you’re debt free by the time you retire. I’m currently working on a couple hubs that address those issues.

Thank you for visiting. I hope it gave you a little inspiration and hope.