How to balance debt and invest for retirement
By Christina Couch • Bankrate.com

Who could say no to free money? Generation Y. Fewer than one-third of all eligible workers between the ages of 18 and 25 participate in their company's retirement plan, according to a survey by human resources research firm Hewitt Associates. They're losing free, steadily increasing funds from employer-matched contributions.

It's not hard to see why retirement savings has taken a back seat to other obligations. In the past decade, the average level of debt for a graduating college senior has more than doubled. Student loan debt tops $20,000 for 2008 graduates, who also carry an average credit card balance of more than $3,200, according to The Project on Student Debt, a Washington, D.C.-based nonprofit organization.

Nicholas Aretakis, author of "No More Ramen: The 20-Something's Real World Survival Guide," says this is testament to why it's important for younger employees to develop long-term savings habits early. "It's crazy for any employee, even under financial strife, not to save for the future," he says. "Many feel that they cannot afford to invest when actually the converse is true -- they cannot afford not to invest."

5 tips to savings without going broke now

Know thy budget Prioritize your finances Cut corners and credit cards Save without effort Track your progress

Know thy budget In March 2007, Danialle Foy, a 29-year-old administrative assistant in Chicago, carried nearly $4,000 in credit card debt, $3,200 in student loans, and $11,000 in car loans. By next January she'll be debt free. While Foy wishes she could chalk up her financial success to a generous raise or year-end bonus, her household income stream has remained the same. "Up until last February, (my husband and I) lived paycheck to paycheck and still had debt," Foy recounts. "We had no idea where our money was going and I just got tired of it. I thought 'I don't want to do this anymore. Why are we 28 and poor?'" Like many 20-somethings, Foy dug her way out of debt through careful budgeting. Saving all household receipts for a month, Foy calculated how much she and her husband spent and then devised a simple budget for groceries, rent and utilities, household and pet expenses, emergency expenses and entertainment. "I budget for everything and we take out cash for the things we buy," Foy says. "If you use actual bills to pay for things, it's harder to overspend. You won't have 45 ATM charges you forgot about." Creating a budget is one of the simplest and most effective strategies recent graduates can use to limit spending, says Dan DeKeizer, a vice president and actuary in MetLife's Retirement Strategies Group. By learning to live on a budget early, recent grads not only save money now, they also set themselves up to save increasingly larger sums in the future. "Learning to live on a budget is especially important to a 25-year-old because if you can live on less when you're young, you can put salary increases directly into savings," DeKeizer says. "You'll also have the advantage of more compounded interest on your savings."

What's your secret to success with retirement? Or, are you struggling? Share your story.

-- Posted: June 23, 2008