What should I do if I don’t have enough money to save for retirement?
I’ve been working on building an emergency fund. Unfortunately, there have been a lot of setbacks which means that its taking me a really, really long time. I don’t make a lot of money so putting money way is very, very hard. Putting money into a retirement account is not really happening right now. Yet, I still put $5 a month in. Why do I do that, you ask?
How Did This Start?
Well, many years ago I was lucky enough to receive advice when I took my first job that I was smart enough to actually follow. At the time, I was fortunate enough to be living at my parent’s house rent-free so my expenses were really low and although my first job wasn’t paying tons I didn’t have to spend most of it. I met my personal finance teacher from high school who told me: Max out a Roth IRA as soon as you can. So I did. So I took her advice and saved up pretty quickly to open my Targeted Retirement account from Vanguard (a pretty basic and simple approach for anyone who is looking for a simple retirement account). Once the account is open with the initial minimum amount, you can deposit as little as you want (assuming you haven’t maxed it out- no worries there!). Most accounts have a pretty large initial balance so you would need to save up for that first.
After that first year, I moved out, got married, had kids and dealt with life. Saving got a lot harder especially since I hit a period of unemployment. I was and still am unable to put aside money for retirement. But… I decided to still put $5 a month into that account.
One reason is because of compound interest. I like to think that even the smallest amount will grow and make a small difference as I grow older. I may be able to put more later on, but at least this small amount will grow over the years. A little is better than none!
But ….The biggest and main reason is because:
To Create HabitsCreating good financial habits is the key to successfully getting your financial life under control. Click To Tweet
The hardest part of creating a habit is beginning. And saving money must become a habit in order to be successful. (That’s why its best to start as young as possible. Parents: start teaching your kids to save now!!!).
Setting up an automatic deposit is the first step. And that is usually the hardest part. Fear can come into play. “What if I need the money now?” Laziness comes into play. “It’s too annoying, I’ll do it tomorrow.” Complacence comes into play. “I’ll have enough money to retire on when the time comes.”
Taking that first plunge is the hardest part. But once that first step is taken it is a lot easier to keep it going. Human beings work on inertia so stopping a habit is just as hard as starting for example, stopping an automatic deposit is just as difficult as starting an automatic deposit because all the same thoughts and excuses come into play (subscriptions anyone?).
Once I have more money to save (it will happen one day!) then adjusting the amount to be deposited is easier than setting up the deposit. I’m talking emotionally here- not physically! The habit has already been created- I will be just adjusting the amount. A much easier task! If I need to increase in really small increments I can do that as well! Slowly, month by month, that $5 is creating a habit that will be hard to stop. It’s making it so much easier to save even if the amount is negligible!
Sometimes it seems that small amounts don’t really make a difference. When we do the math it seems depressing. There are so many articles and blogs out there bashing the “latte factor”. But- when you do save, even the smallest amount, and you do resist the impulse to buy something (even if it’s cheap) you are creating habits that will hopefully last a lifetime.
Creating and maintaining good financial habits is the key to getting your financial life in order. It is what makes you spend and save responsibility even when your income increases. It is what helps you navigate every type of financial situation you may encounter.
And that is most definitely worth it!
Where should I put my savings? In your Savings Ladder!
Are you clueless when it comes to your finance? The Basic Guide to Budgeting and Personal Finance will help you get started.