Finding extra money to invest
Saving for retirement is a simple concept; just spend less money than you earn. In reality, once the monthly obligations are met, there often isn’t much left to invest. Here are nine ordinary places to look for extra money:
- Save “found” money. Invest any extra money such as tax refunds, cash gifts, bonuses, overtime and raises. When your car note is paid off, continue paying that monthly amount into savings.
- Watch impulse purchases. Monitor your monthly spending. Reduce trips out to eat, expensive cups of coffee, magazines and ATM fees.
- Keep an eye on interest costs and become a negotiator. Consider refinancing your mortgage to a lower rate. Consolidate your credit card debt to a lower-cost loan. Pay your monthly credit card bill in full. You can negotiate the fees and interest rates at your bank, your credit card company or your mortgage company for starters.
- Learn to bargain shop. Just about everything can be purchased for a lower price — from airline tickets, hotel and rental cars to appliances, furniture and clothing.
- Make use of tax-advantaged savings. Use your employer’s retirement plan, especially if it matches some portion of your contribution. If a flexible spending account (FSA) is available for health care costs or dependent child care, use that as well. Utilize a Traditional or Roth (if eligible) IRA for additional retirement savings.
- Evaluate your utility costs. Shop around for lower-cost providers, if available. Review your phone bill; use prepaid long-distance cards and cut out the expensive extras. Average your utility bills, if possible, to help with budgeting.
- Review your insurance policies. Raising your deductible could lower your premiums. Avoid over-insuring or carrying expensive coverage that you don’t need.
- Give yourself a raise. If you’re getting big tax refunds, reduce your withholding. Invest the increase in your paycheck.
- Pay yourself automatically. Set up a salary reduction from your paycheck into your retirement account. The money will be tax-deferred, so your dollars will go further.
The key is to start. Make a commitment to increase it by 1% annually. When retirement arrives, you will be amazed and thrilled at the power of time, compounding and tax-deferred growth.