I know a lot of you whiners are like, “But I just got my first job! I’m a baby! Wah wah!” Still, it’s never too soon to start thinking about retirement. Saving for retirement doesn’t have to be a dramatic project, but it does require you to plan and think ahead. Here are a few ways to save for your retirement—or even just a sweet vacation or emergencies if and when the poop hits the fan at your current job.
1. Live below your means. Living within your means is okay. That’s normal. That’s fine for just the present. However, if you want to have a nest egg for the future, you need to live below your means. This allows you to save whatever the difference is for your retirement. If you can afford to pay $1,600 in rent and utilities every month, look for a place that will be $1,500 or less. Use those savings for old age, or even just a sweet trip to the Bahamas next year.
2. Don’t buy a luxury car. In the market for a car? Shop wisely. You don’t need a 2016 luxury model, which will cost you not just more from the outset, but also more in terms of parts, premium fuel, maintenance, and taxes. A Hyundai, Toyota, or the like will serve you just as well for a lot less money. In fact, a used car maintains its value better: Edmunds.com reports that a car loses 9 percent of its value the day you leave the lot, 19 percent of its value after one year, 12 percent the second year, 9 percent the third year. The longer you have a car, the more its value decreases—but the slower it decreases. As for pricing, a car that’s worth 10 to 20 percent of your salary should work well without too much maintenance. Keep in mind also that every cent you don’t spend on a car is a cent that could go into something that can make you a profit, like real estate.
3. Open an IRA account. An IRA or Roth IRA account is a smart way to save for retirement, because they’re tax deductible. If you contribute, say, $2,000 from your $50,000 salary into your IRA retirement account, your taxable income will be $48,000, meaning you’ll get money back on your taxes if you contribute your own money to your own account. Isn’t that nice? And once the cash is there, there are no capital gains taxes on the investments. The only taxes you’ll ever have to pay are from withdrawals if and when you take money out of the account after you retire.
4. Maximize your matching. If your employer offers 401K matching, for the love of God, take it. It’s free money. It’s free money. Got that? Free money. Just to reiterate: Free money.
5. Get health insurance. Health insurance costs increase as you age. Get your health coverage now while you’re young and it’s (fairly) cheap. Taking care of your health now can save you a lot of trouble, pain, and money later.
6. Take care of your teeth. Brushing, flossing, and regular cleanings are a lot easier to deal with than root canals, oral surgery, extractions, and dentures later. Keep in mind, though, that sometimes paying for your semi-annual cleanings out of pocket, especially if you have good habits, can be cheaper than paying for dental insurance all year. That said, if your company offers you the coverage, just take it.
7. Drop your damn vices. Seriously, smoking? So expensive and so ’90s—not to mention terrible for your health, which will make it an even more expensive habit once it takes its more severe tolls. Drinking? Expensive, and potentially deadly not just to you but to others. Weed? Hey, it’s your life, but don’t complain when potential employers nix you for failing a drug test. Drinking, smoking, and drugs are a personal choice, and that’s your business. But know that the price you’re paying for them is probably higher than you realize—especially when you think of how much of that cash could go to stocks with nice dividends.