Retirement may be decades away, but that doesn’t mean you shouldn’t start preparing right now! The earlier you start saving, the easier it will be to reach your retirement goal. However, it’s not easy to put money away when you have so many other expenses and bills to pay first.
Fortunately, there are some ways to start saving for retirement on a tight budget that don’t involve cutting out all other expenses entirely. Use the five tips below to get started now.
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1. Track Your Spending
The only way to save money is to spend less of it and a simple way to do that is by keeping track of your spending. Keep an eye on where your money goes and you’ll be able to predict what you can afford in retirement.
It will also help prepare you for any income fluctuations, like a raise or cut in hours at work. Plus, being aware of where your money goes now will allow you to identify areas where you can cut back if necessary.
2. Create a Free Savings Account
When you’re starting out, it can be difficult to save because your income is unstable—you could have months where you don’t have enough money to put anything away. The good news is that you don’t have to wait until your finances are more stable; there are a number of banks and credit unions that offer free savings accounts, allowing you to start saving with as little as N500 and above.
Even if you only have a few naira/dollars to spare each month, those small amounts will add up over time. And if you do end up having an unexpected expense or two (or three), you’ll feel better knowing that at least some of your hard-earned money isn’t going toward frivolous spending.
3. Build an Emergency Fund
If you’re trying to save for retirement but have bills piling up, it can be hard to know where to start. The good news: It doesn’t have to be all or nothing. Start by setting aside some money in an emergency fund—ideally enough to cover three months of expenses—and then put that money toward your retirement savings goals.
You might not hit your target as quickly as you had hoped, but at least you won’t have to worry about covering those unexpected expenses with credit cards. And don’t forget to contribute regularly so you don’t have to make one large lump-sum payment; that way, if something does happen (like losing your job), you won’t feel financially crippled.
4. Prioritize Debt
Your first task is to pay off any debt, whether it’s credit card or student loan debt. Not only will you save yourself thousands of dollars in interest payments, but paying off your debt will also increase your monthly disposable income, which you can put towards your savings goal.
To calculate how much money you need for retirement and what percentage that amount represents compared to your salary, try out our savings calculator . Once you know how much you should be setting aside each month, use our guide to create an effective budget .
If there are still some expenses that are non-negotiable (such as rent), look for ways to cut back elsewhere. For example, if you have cable TV, consider switching to Netflix , where new episodes of shows are available at a fraction of the cost.
5. Invest More Than Saving
One of the common misconceptions people have is they think they need to divert all their savings into retirement accounts in order to ensure they’ll have enough money when it comes time to retire.
While you should definitely save and invest as much as possible, many experts recommend investing 15-20% of your income each month—investing even more than you save. This can help you build up cash reserves so if an emergency crops up you have money readily available.
