***Guest Post***

It’s tough to save for retirement on a tight budget. There are so many expenses you have to cover—grocery shopping, utility bills, credit card bills, fuel, clothes, medicines, travel, tuition fees for your kids, and other needs and wants. Plus, you need to save for your financial future. With all the demands that are on your money, saving for retirement can feel like a Herculean task.  How can you manage so many things every month? Well, the only way to do it is prudent budgeting and financial planning. 

Retirement is a reality for everyone. At some point, you are going to want to stop working and embark on a new chapter of your life. If you start planning in your 20s, life after retirement will likely be comfortable since your investments will compound over decades. You can buy your dream home, take up new hobbies, and explore remote places around the world!

Regardless of whether you have a high income or are on a tight budget, you have to put money aside each month to retire one day. The sooner you start saving and investing money, the more time it has to grow, which ensures that you have the resources you need for a happy retirement! 

7 Tips to Save for Retirement on a Tight Budget 

Tip #1 – Set a goal

How much money can you contribute to your retirement savings plan? Have you created a spending plan and figured it out? If not, start by contributing 1% of your income toward your retirement savings plan. As your income rises, you can gradually increase this percentage. Also, set SMART financial goals to improve the likelihood that you will be successful!

Tip #2 – Pay yourself first

As soon as you receive money, contribute it to your retirement savings account. To make it easy, use financial automation, and have it done for you. This way, a specific amount of money will be transferred to your retirement account every month like clockwork. The ‘pay yourself first’ strategy is a great way to save money before you spend it, and it will help you build a nest egg over time.

Tip #3 – Increase your income

Boosting your income and keeping your expenses the same is a great way to save more money. Consider getting a side gig and using that money to boost your retirement savings. There are tons of online jobs you can try. You can work as a virtual assistant or a freelance editor. If you love to be on the road, you can work as a rideshare driver. Another option is also using your savings to buy income generating assets. 

Tip #4 – Reduce your expenses

Reviewing your expenses is an easy way to determine where you are spending money and if those expenses are providing value. Do you use that gym membership anymore? Do you need cable and multiple streaming services? An easy place to start trimming your expenses is by looking at your subscriptions. Check the auto-renewal options, dates, and cancel or pause the subscriptions that are similar or that you no longer need.

The reason most of us need to reduce spending is so that we can save money and start planning for retirement.  Depending on your happy expenses, you may cook more meals at home, utilize thrift stores instead of buying new, or only make purchases when they are on sale or you find a deal.

Tip #5 – Use windfalls

Oftentimes, financial windfalls can be a real blessing. But in some instances, they leave people in a worse financial position than before they received them! When you receive a work bonus or tax refund, commit to saving the majority of it. This way, you are putting money aside for retirement, but you also get to enjoy part of it, too!

Tip #6 – Get your employer match

One of the easiest ways to earn free money is by getting your employer match on contributions you make to your retirement account. If they are willing to contribute up to 6% of your paycheck, you should do the same. Contact the HR department and ask them how much more you need to contribute to receive the full employer match. With this information, increase your contribution amount to ensure you are receiving the full match.

One financial pitfall to avoid is thinking that you will contribute to your retirement when you earn more money at some point in the future. This is a mistake, and you should start contributing now, no matter how small it is now, and build upon it as your income grows.

For instance, if you get promoted, you will likely receive more pay. When your income increases, you may have the urge to spend more and experience lifestyle creep. But if you keep that urge in check, you can use your higher paychecks and put them towards your retirement savings goals.

Tip #7 – Pay off your credit card debt

If you are serious about building a retirement savings fund, pay down your debt. Target high-interest debts first, as they keep your burn rate high and eat up your savings. Credit card debts carry a high interest rate, much higher than what you can typically earn on equity investments. Therefore, credit cards compound faster, which quickly buries you under them and delays the point at which you’re able to retire. 

The best approach here is to live below your means and pay your credit card bills in full every month. If you have credit card debt, use one of the systems to become debt free!

Final Note

Before saving for retirement, it’s important to build a solid financial foundation, and part of that foundation is an emergency fund. Unfortunately, emergencies can occur at any time, and if you aren’t prepared, it may cause financial havoc, which means you may have to withdraw money from your retirement savings account and incur early withdrawal penalties and taxes. This makes an already bad situation even worse. Having said that, a good money rule of thumb is to set aside 3-6 months of your living expenses in an emergency fund that is only for true emergencies. Once that’s done, continue planning and saving for your retirement.

About The Author: Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a principal attorney.