Jim Blankenship over at Getting Your Financial Ducks in a Row put forth a blogger challenge for those of us in the financial blogosphere. He is a financial planner, and he worries about the rate at which we Americans are saving (5% on average). So he suggested that we bloggers offer up a challenge to our readers. November is right about when most employers are going through their benefit cycles, so now is the time to amp up your retirement savings. And Jim has a very doable amount that he suggests we start with: 1%. So if you're not contributing anything to your retirement, start by putting aside 1%. If you're at 6%, up it to 7%. It may seem as though 1% will not make a big difference--after all, 1% of a $50,000 per year salary is only $500. But that's $500 you don't have to find later, $500 that will be earning compound interest, and $500 that you're probably not going to feel the loss of. Not bad for a paltry 500 bucks.
If you're not sure how to find that extra 1% to put aside, LO and I have come up with some ideas:
From the Source: Find Extra Money in Your Paycheck
1. If you get a raise this year, have 1% of it go towards retirement. This is a great way to not feel any pinch while still being responsible with your retirement.
2. Adjust your withholding so that there is more available in each paycheck to go toward retirement. If you get a big tax refund every year, you're basically giving Uncle Sam a no-interest loan. It won't take much of a change withholding-wise to get about 1% more each paycheck, which you can turn over to your 401k. Then your paycheck stays about the same size, and you can still get a modest return come tax time.
Frugality Matters: Reduce Your Expenses
3. You can likely find $500 in your budget over the year ($42 per month) that you can cut without feeling it. Some examples: one dinner out per month, your cable bill (Netflix is better, anyway), filling up on gas when you commute alone (because carpooling is awesome), etc.
4. Pay off your debt, but keep paying yourself. You're used to the equivalent of a car payment or a credit card payment or a student loan payment being part of your monthly budget. Once that debt is paid off, just keep the amount going out the same, but have the money deposited in your retirement account instead.
Save Your Pennies
5. A good old fashioned piggy bank or change jar is an excellent way to "find" money. Those loose quarters and pennies that might otherwise get lost in the couch cushions can add up quickly, particularly if you are a cash envelope family.
6. I remember talking to a fellow teacher years ago who claimed she didn't save for retirement because she wanted to enjoy her money while she was young. Foolishly, I refrained from slapping her silly, which I regret to this day. She definitely needed an attitude adjustment. Saving for retirement is not giving something up. It's providing yourself with a gift. One that no one else is planning on giving you. It can be hard to find extra money in the budget, but giving your future self a 1% gift in 2013, and adding 1% each year, will cause a minimum of financial pain. And to be honest, can you think of a worthier cause than your own golden years?
To see other blogs in this series, please check out:A Dozen Ways to Increase Your Savings Rate
on Getting Your Financial Ducks in a Row.