The news is full of articles about the Obstacles to Millennials Saving for Retirement. Millennials aren’t saving enough for retirement. Half of Millennial women aren’t saving for retirement. It’s a pretty gloomy picture.
But I’m here to tell you that not only is saving for retirement not only possible, but actually incredibly simple. I’m 26 and I’ve already saved $130,000 towards my retirement.
I started saving at the age of 23 as a new college graduate with $10k to my name.
It took me approximately 1,000 days to save $120,000. That works out to just over $100 a day. It took me:
- 4 months to save $15k
- 10 months to go from $25k to $50k
- 9 months to get to $75k
- 8 months to get to $100k
- 6 months to get to $125k
Looking back at my statements showed me most of my net worth is from direct contributions I’ve made. Only a little fraction is from market gains. Even with minimal help from the market, the compounding interest is starting to add up as seen in the shrinking gap between $25k milestones.
How I Did It
I saved up so much so quickly due to 5 factors: no debt, tracking my spending, shared housing, not upgrading my car, and automating the saving process.
I graduated from an average state school with no debt thanks to a full-ride scholarship, a stint in the Air National Guard, and other part-time jobs.
Now, I realize many of you reading this have already graduated with some student loan debt. Don’t despair! All hope is not lost. Your first priority will be to focus all your efforts on paying down the debt you have. Start a side hustle. Get an extra job. Minimize as many expenses as you possibly can. Throw every single dollar at your loans. There are so many things you can do without a cloud of debt hanging over your head.
Quite possibly the thing that helped me the most was tracking my spending. I use Mint.com so it’s automatic. I check in a couple of times a month to see how I’m doing according to my budget.
Before I started to really crack down on my spending, it was far too easy to just pull out my card and spend whatever I wanted. Then I started track everything and realized I was wasting money on stuff I didn’t even care about or didn’t need. Only after you start to track your spending will you find out where your problem areas are and work on whittling them down. I had a huge problem with overspending at Target, so now I just don’t go.
It seems like such a small thing to get worked up over, but it’s the small changes that really start to add up over time.
The thing that was most surprising to me was seeing how quickly housing added up. My first rental cost me $900 a month. Not too bad…. Until I realized that was over $10k a year. A full 16% of my spending went towards housing! I could’ve used that money for fully maxing out my HSA!
Having a roommate can sometimes be troublesome, but the positive impact on my wallet outweighed the bad. I got a roommate and cut my housing expense to $450 a month. That one small change immediately added an extra $5k back into my pocket for the year. That’s huge.
I also furnished my house through a combination of hand me downs from family and friends, Craigslist deals, and estate sales. I got perfectly great stuff for cheap and saved it from going to the landfill. That was a win for both my wallet and the environment!
Another small change was actually what I didn’t do. I did not go out and buy a new car right after starting my new big girl job. I had to buy a car in college when I hit a deer, so my car wasn’t that ‘old’ to me, even though it’s from the 2005 model year. There was, and still isn’t, anything wrong with the car. Sure, it has 155,000 miles on it. It’s not the newest car in the parking lot at work, and it doesn’t have fancy bells and whistles like heated seats or a bluetooth connection.
However, it is entirely paid off. Not having a car payment has saved me at least $12,000 since that’s the level of car I would’ve bought. In addition, since it’s older, my costs are lower when it comes to registration and insurance.
All those little things add up to $20,000 more in my pocket. Since I mostly invested that money, it’s now working for me and earning me even more money.
Speaking of investing, the key to my success was automating the entire process. I made saving a priority and based my budget off that. I have automatic contributions set up for my 401(k), so I don’t even see that money hit my bank account. I can’t spend it if I don’t see it come in. I also have direct contributions taken from my paycheck for my HSA. I am lucky to be young and in good health, so my health costs are relatively low. Finally, I have an automatic withdrawal set up for my Roth IRA from my bank account.
Since I am so young and have plenty of time to recover from a down market, I invest solely in index funds like VTSAX and an S&P 500 index fund with super low fees. Low fees means I get to keep more of my gains, which just like at the gym, I’ve worked hard for and would like to keep as much as possible.
With just a few simple changes, I've set myself up for a very cushy traditional retirement and made early retirement a possibility. The smarter you are with your money early in life, the easier it is to get ahead of the pack later.
What was your smartest money move?
This article first appeared on Fiery Millennials.