My wife and I were having a conversation the other day about saving for retirement and what regrets, if any, that I had. I had accumulated a fair share of debt early in life and when I finally decided it was time to repay that debt I ignored saving or investing. Sure, I had a laser like focus on paying down that debt, but did I do myself a disservice by not also saving for retirement at the same time? Believe it or not, a variation of this issue is dealt with by quite a number of individuals in various stages of life.
What if I Have Little Money to Invest?
Looking back to my personal situation I felt as if I had little to save or invest with. I thought everything had to be going towards my debt repayment and because of that I sacrificed several years of retirement planning. In fact, retirement planning was the last thing on my mind at the time. The principle I was failing to realize was the magic of compounding and the importance of starting investing as soon as possible. I have a favorite saying – “time is the greenhouse to your investing dollars.” Time grows invested money and the earlier you start, the more it will grow. The thing that holds many back is the belief that having a small amount to invest means they should wait to get started. As one who used to believe that false maxim, I can assure you that is only a self-defeating belief. Even if you only have $50 a month to start investing with, don’t allow that to hold you back. Starting small will help you develop the discipline of investing, which will reap you benefits in the future.
Make Your Money Work For You
Once you’ve decided to start investing you need to make your money work for you. That means if you have a 401k with your employer and they offer you a match, you should take it. Why wouldn’t you want to? After all, free money is the best kind I am aware of. Immediately after taking that match you have automatically doubled your money or at least grown it by 50 percent. Once you start investing in your 401k be mindful that not all investment choices are the same. Be careful to choose ones that have the lower fees so your money is not eaten up by needless fees. If you’re brave enough to also add a self-directed IRA on top of your 401k investing then make sure you choose a brokerage that you like and one that will not nickel and dime you with fees.
Saving For Retirement is a Marathon, Not a Sprint
The faulty belief I had years ago was that I could get to saving for retirement when I could afford to and could be done easily. The fact is that saving for retirement takes years and not days and your mindset should be as such. If you know any long distance runners, that’s how you should view your investing for retirement. They spend weeks and months preparing for their grueling race. A beginning marathoner will generally train six months for his or her first marathon. Then they gradually increase running distances daily and weekly to prepare themselves for the big race. If they did not, they generally would fail miserably. This is how you should approach retirement investing. Start off even with small amounts, so the stocks you’re investing in can grow over time and help secure a suitable retirement.
Have you ever faced a situation where you felt you could not afford to save for retirement? How did you solve it?
This post was originally published on June 5, 2013 and updated on June 17, 2021.