3 Painless Ways You Can Start Saving For Retirement Today

We all know we need to save for retirement, but how many people do, really? And if they do, are they doing enough? A recent study shows that the average American household has only $8,863 in savings – not much at all when you consider that someday your income stream will cease and probably not be wholly replaced by Social Security.

Here are three easy ways to help you start saving, starting today!

1.  Pay Yourself First

This is the first tip for a reason. If you don’t make yourself a priority, who will? Take good care of your future self by setting aside a certain percentage of your income each paycheck.

Conventional wisdom used to dictate that that percentage should be 10%, but in truth, if you are late to the savings game you might want to increase it. If you have that amount automatically deducted from your checking account and deposited in savings, you won’t ever see it and eventually won’t miss it.

At least one national financial firm advises the average consumer to save 20% of income, apply another 50% to necessities, and use the final 30% for discretionary spending. Again, if you want to speed up savings, switch it up – 30% savings, 50% necessities, and 20% discretionary.

Check out Money Fit’s free online 50-30-20 calculator to figure out what such a spending plan looks like in your finances.

2.  Pay Down Credit Card Debt

While this isn’t a savings strategy, necessarily, it is a way to make sure you are not wasting money paying high interest, money that you could be saving.

At the time of writing this article, the average American has a balance of $5,700 on credit cards. Let’s say that a credit card has an interest rate of 18.9% (many cards are much higher!). Your monthly payment is $228 and you will need 11 years, and 10 months to pay that off. In the end, you will pay the principal balance PLUS $3,563.76 in interest. That’s a lot of money!

You could save much of that $3,563.76 for yourself by paying that credit card off sooner. In the above example, we set the minimum payment at 4% of the balance.  What if we increased it to 8%? Sure, your monthly payment starts at $456 but you will pay it off in 5 years and 5 months, and pay only $1,374.28 in interest – saving 61% of the interest you would have paid in the first example!

So, if you haven’t started saving yet and you have credit card debt, pay those credit cards off first. If you have more than one credit card, pay as much as you can toward the card with the highest interest rate first and pay the minimum on the others.  When that first card is paid off, pay as much as you can to the card with the second-highest interest rate and the minimum on the others, and so on. Eventually, you will pay all of your cards off, and then you can put the amount you were paying towards credit card debt toward your future by saving it.

See Money Fit’s Do It Yourself Debt Relief recommendations for more ideas.

Once you’ve paid your cards off, I don’t recommend cutting them up.  Save a gas card, Amazon card, or a card that gives you points or mileage and use that, paying it off every month.  This can improve your credit score, and with a better score, you can get a mortgage or a car loan at a lower interest rate. That’s right – if you work to improve your credit, you can get loans more cheaply.

3.  Live Within Your Means

If you have not started saving, and you have credit card debt… that is a sure indication that you are trying to fund a more extravagant lifestyle than your current income can support.

Think about it… if you had a bit of saving set aside, you could easily fund a dishwasher replacement, a dental implant, or a major car repair.  Instead, you are relying on credit cards for emergencies (or extravagances!) and paying much more than you need to because of the interest rate.

Here’s the answer:  First, make a budget by writing down your weekly or monthly income, then writing down your weekly or monthly expenditures for necessities. Don’t forget the occasional expenditures like holiday presents, haircuts, regular car maintenance, etc.

Take a look at what you have.  Will your income cover all your necessities? If it does, but there is nothing left over, you need to cut back somewhere because one must have some discretionary income to live a quality life.

How to cut back? Put yourself on an oil/gas/electric monthly plan where you spend the same amount each month. Inspect your cable and cell phone plans… are there savings there? Can you turn up the temperature in the summer and turn it down in the winter to save on heating and A/C costs? Can you purchase groceries and other household goods at a big-box store in bulk, and save that way? Get creative. It’s your future we are talking about.