According to a 2019 TD Ameritrade Report, nearly 70% of Millennials feel behind on saving for retirement. Here’s some financial advice I’ve picked up through experience and working in finance for a tech company.
Track your spending and saving
If you think you know where your money is going but you’re not tracking it, then you don’t really know where your money is going. Keep track of your spending for 3 months and see what trends emerge. How much are you spending on basic needs (rent, car, electricity)? How much is going towards fun? How much are you spending on eating out? Mint is a great app you can use to easily track your spending habits.
Create a budget
Once you’ve learned more about your spending habits, it’s time to create a budget. This will help you ensure that you’re not spending more than you’re making. It can get confusing knowing how much to allocate towards expenses, savings, and retirements savings, so here’s are some easy rules to follow:
- 50% of your take home pay (after taxes) should go towards your basic needs (rent, gas, utilities, groceries, clothes).
- 20% should go towards fun (social activities, eating out, travel, etc.)
- 15% should go towards retirements savings (401(k), Roth IRA, Traditional IRA. etc.)
- 10% should go towards future purchases (Car, House down payment, starting a family, etc.)
Start where you can
If you’re not able to set aside 10–15% for retirements savings, start with what you can do. Start with 5%, or even 1%.
Regardless of how much you set aside, the important thing is that you set some money aside, and that you do is consistently. Consistency over time adds up to big savings in the longs run.
Watch the little things
You’ve probably heard this your whole life, but the little things really add up. Everything you spend is money that could go into savings. So look at the little things that you can change.
A $5 latte every day comes out to $1,825 a year. Make your own coffee and put that money into savings instead.
- If your city has public transportation, take the bus, subway, or train instead of an Uber or Lyft. Or walk or bike and get some exercise. You’ll not only save a lot of money, but you’ll be working on your health and fitness at the same time.
- Do you really need 100 channels of cable? Get basic cable instead, or opt for something like a Netflix subscription.
- Speaking of subscriptions, look at all the subscriptions you have. Do you even know all of them? Chances are, there is probably a lot you don’t need. This article from Vice gives some tips for how to keep track of and cancel unused subscriptions.
Here are some other simple things I do to save money that all adds up in the long run:
- Switch to a cheaper cell phone plan
- Rent books from the library
- Sell extra stuff like clothes, kitchen items, and sporting goods on eBay or Craigslist. If you have a lot of books just taking up space, sell them back here.
- Turn the temperature down on the shower
- Wear a sweater in the winter instead of always cranking up the heat
- Turn off all the lights when you leave the house
Stop eating out
A recent Bloomberg report showed that for the first time, spending on dining out eclipsed grocery sales. Maybe you eat out every day for breakfast, lunch, and dinner. Or maybe you’re eating out two meals a day. Chances are, it’s probably way higher than it should be.
Here are some things you can do:
- Make your own lunch the night before and brown bag it. $15 a day for lunch, 5 days a week for a year is $3,900.
- Are you eating out every night? Start by trying to cut this back by one or two nights a week and eventually get to where you’re only eating out once or twice a week in the evenings. Use eating out as a treat instead of making it a regular activity. Not only is cooking your own dinner cheaper, it will also be much healthier. $20 for dinner, 5 days a week for a year is $5,200.
Set up automatic deposits for your savings. Because the little things add up
- If your company offers a 401(k), you’ll be able to designate a certain amount, or a certain% of your paycheck that will go to your 401(k). Even if it’s just 1% of your paycheck, get this set up so the withdrawal is automatic.
- It’s a good idea to have a Roth IRA or a traditional IRA. Whichever one you pick, set up recurring deposits that happen every month, or twice a month. I have a Roth IRA and a Traditional IRA with Wealthfront. Fidelity is also another great option I’ve used in the past.
Many people feel they’re not saving enough for retirement. While it’s hard to know where to start, there are small changes you can make now that will help.
Track your spending to see where your money goes, then create a budget. Set aside 50% for necessities, 20% for fun, 15% for retirement, and 10% for future purchases.
If you can’t hit these percentages for retirement and savings, start with as little as 1% and go from there. Find the little things you can improve on, like not eating out so much, cutting out subscriptions you don’t use, and switching to a cheaper cell phone plan.
In saving for retirement, slow and steady wins the race. Make some small changes now, and they will eventually add up to something big.
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Previously published on medium
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