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The $25 Dollar Solution

What if you were told that you had to retire in 20 years, or had only ten more working years?  Have you saved enough to live in retirement?  Like many of my generation, the answer is no. Not even close.  Some have saved nothing at all and are expecting social security, a system they have contributed to will be enough to live out their life in retirement. This alone will not be enough. Scary situation this one, quite common I am afraid.

The paycheck to paycheck mentality predominates. We needlessly waste so much money and do not realize it leaving us nothing to save. Many say that they will start once they get a raise or finish paying this or that, but when that raise comes another excuse will be found, another reason why we can’t save.

You do not have to start big; small savings over time add up.  Say you are only able to save $25 a week. That is roughly $1,200 a year.  What can you do with that?  Properly invested you will have more than $52,000 in 20 years and in 30 you will have more than 250,000. Not a bad return on investment (ROI) on $24,000 and $48,000. Imagine you begin at age 19 and contribute every year until you reach the age of 67, your total contribution of $57,600 will grow to approximately $454,000. That is the magic of compounding interest, when your interest is reinvested instead of being paid out.  That interest will then gain some interest as well.

Look into passively managed low-cost index funds; these track a specific sector of the stock market like the S&P 500 or NASDAQ Composite and have lower management fees.  A robo advisor is another option worth looking into.

Where can the $25 come from? Stop buying that morning coffee, make your own instead.  Brown bag your lunch once or twice a week. Quit that unhealthy habit.  Bottled water is wasted money. Combine these and you will easily reach your goal; you can even set a higher goal, sit back and just let your money grow.

Have you done anything to save for your retirement?  Starting small is much better than not starting at all. Get started today; Over time small saving do add up.  For more information on this topic visit my blog.

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Written by javier

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