With open enrollment for most employers being this month, now is a good time to think about increasing your retirement savings as well. I’m not saying you need to increase it a ton, but why not make it a goal to increase it by 1% in the next year? It might not seem like much, but increasing your retirement savings by 1% will do wonders for your portfolio and you will hardly notice the difference. If you are at the median income level of $50,000, a 1% increase in savings amounts to $500 a year more in contributions or a little over $40 a month. Below are some ways to carve out a little extra to save for retirement.
Stop getting a tax refund
Last year the average tax refund was a little over $2,900 and almost 3/4 of
us receive one. Why do we do that? That means that we paid the government almost $250 a month extra to keep our money and weren’t able to use it for ourselves. That’s why if you get a large refund that might not be a good thing. Instead, why don’t you go to your employer and ask to increase your withholdings, which will increase your take home pay which you can put right into your 401(K) or IRA and you won’t even notice it!
Cut your cable, land line, or other expenses from your budget
Take a look at what you are spending your money on each and every month and see if there is something you spending money on that you aren’t using. Maybe it’s that extra cable package that you watch for 2 hours each month that is costing you $30 a month. Or maybe that land line that you never make calls from and you only use to answer calls from telemarketers or political campaigns. Or is it that gym membership that you convince yourself you will eventually use? You need to look at your budget anyway to try to cut out any wasteful spending, but putting the money into savings will provide a much better return on your investment.
Yes, I am going to talk about becoming debt free. Like looking at your budget to trim wasteful expenses, you need to get out of debt regardless of whether or not you are increasing your savings. To help reinforce the need to get out of debt, think of how much your debt is costing you. Let’s just say for example you have a credit card with a “small” balance of $5,000 at a 10% interest rate. The interest you pay each year is $500 which is the same as a 1% increase in savings for someone making the median salary of $50,000. How much, then, are your other credit cards, car payments, and student loans costing you? The way I look at it is this: if you drive through any large metro-area in the country, who has the tallest buildings? The banks and insurance companies. That means when you have debt they are getting wealthy . . . not you. So by knocking out debt and increasing your savings you are contributing to building your financial house.
So answer the challenge this year and make an effort to contribute just 1% more into retirement savings. 1% can go a long way and I’ve given you some quick ideas to make that possible. But what about you, what changes are you going to make to increase your savings by 1% this year? I would love to hear them.
This post is part of the Encourage Americans to save 1% more challenge. You can get more encouragement and tips from other bloggers on the challenge’s main page.