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3 Reasons Why Saving for Retirement Shouldn’t Be Scary

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3 Reasons Why Saving for Retirement Shouldn’t Be Scary

Rent. Car payments. Student loans. There are plenty of reasons young adults are often stressed about money.

As a result, the thought of saving for retirement might seem laughable to some 20 to 30-somethings and downright scary to others. After all, the average Millennial has a hard time imagining a time when they won’t have student debt hanging over their head, let alone a time when they can leave the workforce. Plus, who wants to think about retirement when there’s so much life to live now?

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The truth is that saving for retirement shouldn’t be anxiety inducing at all. In fact, beginning your savings early will actually lead to a huge weight being lifted off of your shoulders in the long run. With that in mind, here are three reasons why you should stop worrying about saving for retirement and start doing it.

1. You can get free money with employer matching

If your job offers 401(k) eligibility, there’s a good chance they also offer some sort of employer matching or profit sharing. This is free money! However, in order to get that extra cash, you’ll probably have to contribute a certain amount yourself.

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When it comes to employer matching, every company is a little different. Some might match you dollar for dollar up to a certain amount, others might do 50 cents on the dollar, and still others might do a combination of the two. That’s why you’ll want to find out what the maximum percentage they’ll give you is and how you can obtain that amount. Then all you have to do is sign up.

Keep in mind that, while you’ll always be entitled to any money you put into your 401(k), your employer matching will likely be tied into what’s known as a vesting period. This could mean that you need to be with the company for more than X amount of years before you get to keep their contributions, or you might be able to keep a larger share with each passing year (20% after one year, 40% after two, etc.). Ultimately this could mean you lose out on some of the bonus money, but don’t let that dissuade you from opening an account in the first place.

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2. You can learn about investing

How much do you know about the stock market and investing in general? If you’re like most Millennials, then the answer is probably “not very much.” In fact, you might not even realize that, by having a 401(k) or IRA, there’s a good chance you’re already investing in the stock market.

Depending on the type of account your employer has or the type of IRA you open yourself, your contributions will likely be put into a mix of stocks, bonds, and securities. When you’re younger these investments can be more aggressive, which usually means a higher percentage of stocks that will fluctuate over time. Then as you get older, most people will move their balances into safer investments like bonds or money markets.

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While this process is mostly pretty hands-off, there is still a lot you can learn. For one, by watching your account (but not freaking out about the day-to-day ups and downs), you can see how stocks react to certain events, such as the Brexit or the presidential election. By taking an even closer look at your account, you can also learn about stock dividends and other terms you might have heard by turning on CNBC before the Shark Tank reruns came on. Ultimately this knowledge will come in handy should you decide to really up your investing game and buy stocks on your own.

3. You can watch your early savings grow into much more

The biggest reason to jump into retirement saving as soon as humanly possible is the amount of cash you’ll have saved up by the time you need it. By getting a head start on your contributions and taking advantage of compound interest, your small deposits will amount to a hefty sum that will carry you through the rest of your time on this planet. You’ve probably seen the TV commercial that demonstrates this idea using increasingly larger dominoes. While that’s not a bad comparison, looking at the actual numbers might do more to impress you.

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According to hypothetical proposed by Business Insider, the difference between starting your retirement savings at 25 as opposed to 35 could mean you end up with double the amount of money when you reach 65. As they figure, if you started putting just $200 a month into an account with an average return of 6% at age of 25, you’d have just over $400,000 40 years later. However, doing the same starting at 35 would only result in about $200,000. Furthermore, the difference in principal contributed is only $24,000 ($96,000 since age 25 versus $72,000 since age 35). If this doesn’t get you to start thinking seriously about setting money aside for retirement now, I honestly don’t know what will.

Conclusion

When you’re in your 20s or early 30s, retirement is probably about the last thing on your mind. While it might seem strange, these are actually the years you want to not only be thinking about retirement but also start saving for it. Setting money aside for your later years doesn’t mean you’re getting old or that you’re wasting your youth — it just means you’d like to have some money to enjoy life after you’re done working. So what are you waiting for?

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Last Updated on January 5, 2022

33 Painless Ways to Save Money Now

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33 Painless Ways to Save Money Now

In a difficult economy, most of us are looking for ways to put more money in our pockets, but we don’t want to feel like misers. We don’t want to drastically alter our lifestyles either. We want it fast and we want it easy. Small savings can add up and big savings can feel like winning the lottery, just without all of the taxes.

Some easy ways to save money:

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  1. Online rebate sites. Many online sites offer cash back rebates and online coupons as well. MrRebates and Ebates are two I like, but there are many others.
  2. Sign up for customer rewards. Many of your favorite stores offer customer rewards on products you already buy. Take advantage.
  3. Switch to compact fluorescent bulbs. The extra cost up front is worth the energy savings later on.
  4. Turn off power strips and electronic devices when not in use.
  5. Buy a programmable thermostat. Set it to lower the heat or raise the AC when you’re not home.
  6. Make coffee at home. Those lattes and caramel macchiatos add up to quite a bit of dough over the year.
  7. Switch banks. Shop around for better interest rates, lower fees and better customer perks. Don’t forget to look for free online banking and ease of depositing and withdrawing money.
  8. Clip coupons: Saving a couple dollars here and there can start to add up. As long as you’re going to buy the products anyway, why not save money?
  9. Pack your lunch. Bring your lunch to work with you a few days a week, rather than buy it.
  10. Eat at home. We’re busier than ever, but cooking meals at home is healthier and much cheaper than take-out or going out. Plus, with all of the freezer and pre-made options, it’s almost as fast as drive-thru.
  11. Have leftovers night. Save your leftovers from a few meals and have a “leftover dinner.” It’s a free meal!
  12. Buy store brands: Many generic or store brands are actually just as good as name brands and considerably cheaper.
  13. Ditch bottled water. Drink tap water if it’s good quality, buy a filter if it’s not. Get 
      a reusable water bottle and refill it.
    • Avoid vending machines: The items are usually over-priced.
    • Take in a matinee. Afternoon movie showings are cheaper than evening times.
    • Re-examine your cable bill. Cancel extra cable or satellite channels you don’t watch. Watch the “on demand” movie purchases too.
    • Use online bill pay. Most banks offer free online bill paying. Save on stamps and checks, and avoid late fees by automating bill payment.
    • Buy frequently used items in bulk. You get a lower per item price and eliminate extra trips to the store later on.
    • Fully utilize the library. Borrowing books is much cheaper than buying them, but in addition to books, most local libraries now lend movies and games.
    • Cancel magazine/newspaper subscriptions: Re-evaluate your subscriptions. Cancel those you don’t read and consider reading some of the other publications online.
    • Get rid of your land-line. Do you really need a land-line anymore if everyone in the family has a cell phone? Alternatively, look into using VOIP or getting a cheaper plan.
    • Better fuel efficiency. Check the air pressure in your tires, keep up with proper auto maintenance, and slow down. Driving even 5MPH slower will result in better fuel mileage.
    • Increase your deductibles. Increasing the insurance deductibles on your homeowners and auto insurance policies lowers premiums significantly. Just make sure you choose a deductible that you can afford should an emergency happen.
    • Choose lunch over dinner. If you do want to dine out occasionally, go at lunchtime rather than dinnertime. Lunch prices are usually cheaper.
    • Buy used:  Whether it’s something small like a vintage dress or a video game or something big like a car or furniture, consider buying it used. You can often get “nearly new” for a fraction of the cost.
    • Stick to the list. Make a list before you go shopping and don’t buy anything that’s not on the list unless it’s a once in a lifetime, killer deal.
    • Tame the impulse. Use a self-enforced waiting period whenever you’re tempted to make an unplanned purchase. Wait for a week and see if you still want the item.
    • Don’t be afraid to ask. Ask to have fees waived, ask for a discount, ask for a lower interest rate on your credit card.
    • Repair rather than replace. You can find directions on how to fix almost anything on the internet. Do your homework, and then bring out your inner handyman.
    • Trade with your neighbors. Borrow tools or equipment that you use infrequently and swap things like babysitting with your neighbors.
    • Swap online. Use sites like PaperBack Swap to trade books, music, and movies with others online. Also, look for local community sites like Freecycle where people give away items they no longer need.
    • Cut back on the meat. Try eating a one or two meatless meals every week or cut back on the meat portions. Meat is usually the most expensive part of the meal.
    • Comparison shop: Get in the habit of checking prices before you buy. See if you can get a better price at another store or look online.

    Remember that saving money is not about being cheap or stingy; it’s about putting money into your bank account rather than giving it to someone else. There are many ways to save money, some you’ve never thought of, and some that won’t appeal or apply to you. Just pick a few of the ideas that sound doable and watch the savings add up. Save big, save small, but save wherever you can.

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    Featured photo credit: Damir Spanic via unsplash.com

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