Saving and investing when money is tight can be tough but even the smallest amount can nearly double your nest egg
We all know that investing for retirement is an absolute unless you want to eat pork ‘n beans three times a day in your golden years. Money is tight though and by the time bills are paid, it’s nice to spend the little left over to enjoy life a little.
So what are you supposed to do? If your last name isn’t Hilton, there may not be much room in your budget for investing. If you can only invest $50 a month, is it even worth it?
What if I told you that just $50 month could double the amount of money you can spend in retirement?
We’re not talking about investing in high-risk stocks or get-rich schemes. You won’t have to spend hours analyzing stocks or live on oatmeal just to fund your retirement goals.
Sound like a plan? You bet it does!
Investing while Living Paycheck to Paycheck
The fact is that everyone thinks money is tight, from those living paycheck to paycheck to celebrities whining to Oprah that they can’t make their yacht payments. I had a high school teacher that used to say, “Show me an income and I’ll show you how to live above it.”
That said, some people have to deal with a whole lot less each month. The Pew Charitable Trust found household spending increased 14% over the decade to 2014 while incomes dropped 13% over the period.
I’m not going to tell you to save at least 10% of your income or challenge you to cut your bills in half. It’s just not possible for most people.
But I’m willing to bet that almost everyone can find $50 a month to put in a retirement account.
That’s half of what most people spend on cable TV alone. It’s just a fifth of what the average American spends eating out each month.
Let’s look at a few ways to find that $50 even when money is tight.
- Turn your budget upside down. Take the $50 out of your income before you start budgeting out expenses. This will force you to cut expenses rather than forego saving if you don’t have enough to cover everything.
- The dollar store isn’t just for party balloons! I save $56.71 per month on groceries by strategically shopping and save thousands a year on these other 20 money saving tips.
- Monthly plans for Republic Wireless start at just $15 per month with no contract and some of the newest smartphones.
- Check out some of the daily deals on Groupon before you go out. If you’re going to spend money, you might as well get a good deal.
One last point, don’t wait until you are debt free to start investing. As long as you pay off your high-interest debt, it’s ok to start building your next egg. Too many people spend their whole lives trying to pay down debt and never get around to investing.
Shopping is too much fun! You may never pay off all your debt but you will definitely need investments to pay for expenses someday.
How Investing $50 a Month Can Double Your Retirement Income
So how can investing just $50 a month double your spending power in retirement?
According to the American Association of Retired People (AARP), one-in-four people over 65 years old depend on their social security benefits for almost all (90%) of their income. That means living on just $16,092 a year ($1,341 per month).
Investing just $50 a month in your 20s can grow to almost $250,000 by the time you reach retirement. From that nest egg, you could safely withdraw $15,000 a year to supplement your retirement spending.
How does almost $32,000 a year in retirement sound compared to the average social security income?
Yeah, there are a few assumptions here like starting to invest in your 20s and earning 7.5% annually on stocks. Even if you start later and make less on your investments, you’re still looking at a much better retirement and you didn’t really have to sacrifice too much to get there.
Investing that $600 a year means saving money on investing fees and getting the most out of your money. Investing in ETFs is a good way to reduce risk and just one of these three ways to invest to make your dollar go farther.
Investing when money is tight doesn’t mean you have to save every penny. Try saving more than $600 a year but there is no minimum to how much can help give you a better life in retirement. I have relatives that live only on social security and it is no fun. Even the most modest investment savings can mean a huge difference.