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When you are in your 20s and 30s, most people tend not to think about retirement. Retirement feels very far away and is something you can worry about later. But, in your 20s and 30s, it matters the most!
You don’t need to make six figures or cut out every joy (yes, you can keep your lattes) to start building wealth for your future. Any small quantity you can start investing now, is important.
The earlier you start saving for retirement, the easier it gets, thanks to compound interest.
So, if you feel like you don’t have enough money to start investing, I’ve got you. This is for you even if you have debt and live paycheck-to-paycheck.
Here are budget-friendly ways to start saving for retirement now without sacrificing your fun:
1. Take Advantage of Free Money (AKA Employer 401(k) Match)
If your job offers a 401(k) match, prioritize contributing at least enough to get the entire match. This is literally free money. As a matter of fact, it is not free. This is part of your compensation package. You must take advantage!
If your employer matches 100% of your contribution up to 5%, that means if you put in 5% of your paycheck, they’re adding another 5%. That’s an instant 100% return. You won’t find that kind of deal anywhere else. Again, take advantage!
Even if you feel like you can’t afford to contribute much, start small. A 1% contribution is better than 0%, and you can slowly increase it over time. Do not let the “all or nothing” mentality keep you from making small strides that make a huge impact.
2. Open a Roth IRA (Even If You Can Only Contribute a Little)
A Roth IRA is a retirement account where your money grows tax-free. This means you pay taxes on your money now, so you don’t owe a dime to the IRS when you withdraw it in retirement. This is why Uncle Sam has a cap on how much you can contribute yearly; it is too good!
You don’t need a lot of money to open one. Depending on the brokerage you choose, you can start with $0 until you are ready to put money in it. You can then start by contributing $25-$50 a month, which adds up over time. And because you already paid taxes on it, you can withdraw your contributions (not earnings) without penalties after five years, making it a great safety net, too.
Do not sleep on a Roth IRA because it is an amazing tool to grow your money!
Here is a step-by-step guide to opening your Roth IRA account.
3. Automate Your Savings So You Don’t Have to Think About It
Automating your savings is a life changer!
Do you know how Netflix takes money out of your account every month without you even noticing? This is the energy you need for retirement savings, starting today.
Set up automatic contributions to your 401(k), Roth IRA, or even high-yield savings account if you’re still working on building up your emergency fund. When saving becomes a habit, it will feel less like a sacrifice and more like another bill you pay that helps you be stress-free.
4. Invest with Low-Cost Index Funds
Investing can be easy, but let it be boring! Let me explain. Index funds are one of the easiest, lowest-cost ways to grow your money. Instead of picking individual stocks, which tend to be very exciting because of the volatility (which is risky and time-consuming), index funds spread your money across hundreds of companies, reducing the risk while still building wealth.
Pay attention to funds with low expense ratios (under 0.20%)—this keeps fees from eating into your returns.
If you have a 401(k), check if they offer a target-date fund, which automatically adjusts your investments as you get closer to retirement. This allows you to be hands-off and retire comfortably.
5. Side Hustle Your Way to Retirement Savings
Do not be afraid of side hustling! If your 9-5 paycheck barely covers your bills, consider using a side hustle just for retirement savings. Even if you only make an extra $100 a month, you can put that into a Roth IRA that can turn into six figures by the time you retire.
Side hustles can be anything from freelancing, selling digital products, babysitting, dogsitting, or even renting out a room on Airbnb. The importance is treating that extra money as untouchable and directly transferring it into your retirement account before you’re tempted to spend it.
You might want to read: How to add a side hustle without burning out.
6. Cut Expenses That Don’t Align with Your Values
You know, I always talk about extreme budgeting or cutting out things that bring you joy, is never the way. Restriction will not get you far. It is about being intentional. Look at your spending and ask: Does this expense actually make me happy?
The idea is that you question the $80 gym membership, and if you do not care about it or use it enough, then you could work out at home for free. Or you’re spending $200 a month on subscriptions you don’t use. Redirecting even half of those savings into retirement can make a huge difference.
Do not waste your hard-earned money; make it work for you instead so that you can have a joyful retirement and travel more than you do now.
7. Increase Your Savings Every Time You Get a Raise
The easiest way to save more for retirement without feeling the pinch is to increase your contributions every time you get a raise. If you get a 5% raise, increase your retirement savings by 1-2%. You won’t miss the money!
This is one of the tips I wish I had known sooner in my career. My mistake was that with my salary increases, I would also inflate my lifestyle, putting myself back in the paycheck-to-paycheck cycle. That was the time to get ahead!
Do not repeat this same mistake. Get ahead now.
These are the top 8 reasons you should max out your Roth IRA this year.
8. Use Found Money (Bonuses, Tax Refunds, Rebates)
Instead of spending your tax refund or work bonus on things that won’t matter in a year, consider putting a chunk of it toward retirement. You don’t have to use it all, but even 40%-60% can boost your retirement fund.
These refunds or bonuses can also help you max out your Roth IRA faster or finally have 3 months of an emergency fund. Get that boost while you can!
You may be interested in: The best time to contribute to your Roth IRA: Monthly vs Lump Sum.
9. Don’t Let Perfection Stop You From Starting
If there is one thing you walk away with today, it is that you should not let perfection stop you from starting. Too many people don’t start saving because they think it’s pointless if they can’t contribute a lot. But honestly, every dollar counts.
Even if you can only save $10 or $20 a month, do it. Hopefully, it will be $100 a month next year, and the following year it will be $250 a month. What matters is getting into the habit of saving. As your income grows, so will your contributions, and the earlier you start, the more time your money has to grow. This way, you won’t have to worry in your 50s about starting to invest when retirement is 15 years away. Your money won’t have enough time for it to grow.
Although it is never too late, starting early is the best you can do right now.
Start Where You Are
You don’t have to be rich to start saving for retirement.
You don’t have to look a certain way to start saving for retirement.
You don’t have to speak a certain way to start investing for retirement.
You just have to start.
Take small steps today, whether that’s putting $50 into a Roth IRA, upping your 401(k) contribution by 1%, or setting up automatic transfers, which can set you up for financial freedom later.
Do not underestimate the power of small steps.
Your future self is waiting. Let’s make sure she’s thriving and not stressing about money.
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