A few months ago I talked about what to do if you felt that you could not afford to save for retirement and it spurred some good discussion for many that are facing that challenge. Another factor that many face in regards to saving for retirement is finding simple ways to do it and this is especially the case as you first start. With that in mind, I thought it would be beneficial to discuss some actionable ways to start investing for retirement if you’re on a budget.
Start to Save for Retirement With Your 401k
I know that a 401k is the obvious answer to saving for retirement. That said, many either overlook it altogether or assume they can’t afford to. The latter of those two is perfectly understandable, though it looks at the situation in the wrong way. I believe even if you’re on a limited budget you can still save for retirement through your 401k and not have to cut back because of it.
The beauty of the 401k comes in with contributions lowering your tax liability as they’re pre-tax and thus lower your tax hit. This is also not to mention the fact that it’s usually done via payroll deduction so you don’t even “feel” the money being transferred out. This is of course assuming you’re okay with getting potentially free money through an employer match. 😉
Cut Back on Subscriptions
If you’re struggling to begin saving for retirement one of the first areas you should look at is your monthly expenses for things like subscriptions and memberships. Do you have a gym membership you rarely use or some magazines you get but rarely read? Those could easily begin to add up to $50-100 per month. Of course, you shouldn’t stop working out, but there are other ways to do it than at the gym.
Take a look at your spending, analyze your priorities and shift some of that wasteful spending towards investing for retirement. That amount may not seem like much, but it’s a great start towards building a retirement portfolio.
Monetize a Skill
More people are starting side hustles as a way to monetize their skills. Why not use your side hustle to help you save for retirement? I know it’s not the most exciting reason to start a side hustle or even something that may be tangible in the beginning, but if it takes off then you could have a nice amount you could put aside for retirement.
The beauty of the side hustle, assuming you can turn it into a business of some sort, is that you also open up the potential to start a SEP IRA that would allow you to contribute on top of what you may already be doing through your employer. With the potential contribution limits a SEP IRA has, that can turn in to a pretty substantial amount to put away for your retirement needs.
How do you save for retirement while on a somewhat limited budget? What are some of your creative ways to put money away?
This post was originally published on April 17, 2014 and updated on June 16, 2021.