Especially during these volatile market days, saving for retirement is not always easy. There are bills to pay, clothes to buy, movies to see and a long list of many other things that can easily get in the way.
With this in mind, I wanted to point out a few ideas on how to save $100 per month. If it doesn't sound like saving this amount would equate to much, over time it can really mean much more than you most likely think.
Let's suppose you invest $100 every month, and let's also assume you invest it into a stock index fund that earns an average return of 8% per year (which, judging by the latest financial headlines is a bit unbelievable, but let's just be a bit optimistic here for historical purposes). Before revealing the results, note the emphasis on "index fund." This is important to highlight because when investing in an index such as the S&P 500, not only do you get some degree of diversification, but you'll also keep the fees you pay and the taxes you owe to a minimum as well.
Let's also suppose the amount you save increases by 3% per year to keep in line with a hopeful increase in wages. So, invest $100 per month in an index fund such as the S&P 500 and at an 8% average rate of return, the following would result:
IF YOU INVEST FOR...
...YOUR INVESTMENT WILL GROW TO...
10 years
$21,796
20 years
$65,265
25 years
$101,454
Source: Finance Yahoo
Looks good to me. Here's a few creative ways to help you get there:
1. Invest your tax refund: April 15th will be here in a blink of an eye. With that in mind, are you one of the unlucky people to get a tax-refund this year? Remember, your tax refund is merely an overpayment of estimated taxes or withholdings that earned Uncle Sam interest, not you. If you were one of the unlucky people to receive a refund, evaluate your estimated taxes or withholdings and don't give it to Uncle Sam as a tax-free loan. Instead, invest it. Doing so could very well get you that $100 monthly savings you've been looking for.
2. Brown bag it: Working? Let's suppose you eat lunch out every day and the average meal costs $12. That's $240 per month in food costs. To save money, would you eliminate dining out every day? Not unless you wanted to miss out on the latest business news or how Bob's date went with Jane. So, let's assume you cut down on the dining and ate out once a week. Doing so would bring the total monthly food costs to right around $50. You still have to feed yourself, right? So let's assume you spent about $100 for some groceries. Do the math, and there you have it - you're left with a $100 dollar monthly savings.
3. Rideshare to Work: Let's suppose you travel 15 miles each way to work, your SUV holds 20 gallons and gets 15 miles per gallon. Two more variables needed: Let's suppose gas costs the historical average of $2.75 per gallon and there's 22 working days in the month. How much would you save if you carpooled with two friends? Sounds like one of those SAT brain twisters, right? And you thought you were out of high school --- Do the math and that'll save you roughly $80 per month and get you a nice ride in that lower traffic carpool lane as well. How great is that?
4. Energy Checkup: Are there ways you can save a few dollars on your monthly energy costs? For me there was. A couple of small touch-ups around the house and I am now helping keep Al Gore happy. With a few mouse-clicks on the "Home Energy Checkup" at http://www.ase.org, I quickly learned a few interesting ways to save a couple of dollars every month on my energy bill and maybe you will too.
5. Skip the Root Beer: It's a rare day when I don't have a craving for an ice-cold Root Beer. Suppose I didn't listen to my own advice above and ate out five times a week. If a Root Beer costs $1.50, I just spent $30 per month. For savings and nutritional reasons, I should have been drinking water. While the $30 savings won't get me my $100, it'll definitely help get me there and make my mom happy along the way as well.
6. Clip Coupons: If you're like me, that means you eat a few boxes of Cinnamon Toast Crunch every month along with a few dozen South Beach Protein Bars and bags of Turkey Jerky. Interested in saving a few dollars on these monthly purchases? Websites such as http://www.coupons.com claim you can print a few of their coupons and save over $100 every week. Who says Double Stuff Oreos are bad for you? When I'm busy saving money when eating them, I would completely disagree.
7. In-Home Beauty Regime: Thanks to a thinning hairline and my Flowbee, it's been at least a decade since I paid someone to cut my hair. Suppose each cut costs an average of $50 and I need to cut my hair once every two months. By doing it myself, I've basically saved $25 per month. Care to come by for a Flowbee? Would you do it yourself? Doubtful on the former, possible on the latter. There are also a few possible things you can do to reduce your monthly beauty costs such as a do-it-yourself manicure or mudpack.
Better nutrition? Energy efficiency? Getting yourself rich instead of Uncle Sam and having more money for retirement? As far as I'm concerned, that $100 per month savings can really go a long way, and hopefully after this brief posting you'll agree.
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