Save for retirement when you don't make much

It's easier to save if you consider what today's expenditure could be worth tomorrow if you invest the money instead. For instance, if Ellenberg puts his hard-earned $840 into a Roth individual retirement account, it would grow to $9,708 by the time he's 60, assuming a 6 percent annualized return. If he saves $840 for three more summers, he'll have $33,638, thanks to his cheaper phone.

Going green helps, too. Just ask the 78 million Americans who gave up credit cards for cash. "Sure, it's easier to use debit cards," says Lee, "But when you use cash, you're going to be more likely to ask yourself, 'Do I really need that -- or do I want it?'"

Be ruthless about debt. Consumer debt "is like cancer," says CFP professional Drew Tignanelli, president of Financial Consulate, a financial planning firm based in Hunt Valley, Md. Because interest compounds, the sooner you pay it off, the more you'll pocket over time.

Slash the most expensive debts first, whether that's a student loan or a credit card with a double-digit interest rate. Consider a second job to eliminate it as soon as possible, and commit to paying more than the minimum amount due.

Pocket savings you already have: Take a look at store receipts. When Michelle Malone did, she was stunned to see she had slashed more than $400 from her supermarket bill last year by using coupons and enrolling in the store's loyalty program. Now the Connecticut mom takes the next step by transferring what she saved on groceries and gas into to a dedicated savings account. "I was looking for a way to move ahead," she says. "I didn't expect it to be so easy."

Pay yourself first

It bears repeating: "Pay yourself first," says IRA pro Ed Slott. "Pay yourself before you get your hot little hands on the money."

If you don't have a retirement plan at work, open one of your own. You may need a required minimum deposit to open an IRA -- generally about $1,000 to $3,000 -- but some banks and brokerages waive their requirement, so you can start saving with just a little. Ameritrade, for example, currently has no minimum balance for its Roth IRAs. Fidelity and Charles Schwab waive minimum opening balance requirements when you sign up for monthly direct deposits into Roth accounts.

That appealed to Rich Rausser's son Matthew, 19. "After getting a part-time job in high school a couple of years ago, my dad recommended that I start saving. It wasn't a ton of money, but I took his advice," says Matthew Rausser. "The account is set up to debit $100 a month that's automatically transferred to my Roth IRA."

Employer plans are often your best bet, however. So if you have access to a 401(k), 403(b), or Roth 401(k) plan, enroll pronto. Earnings are stashed before they're spent -- or taxed, if you're in a traditional 401(k) or 403(b). And most employers match a percentage of contributions, up to certain limits, but generally only if you chip in, too. So contribute enough to qualify for all of the free money available to you.

Tamara Carson, 24, is paying off debt from college, but she made a point to save for retirement -- enough to get her company's 401(k) match. As she pays off loans, she'll boost her retirement savings. "Every dollar you contribute up to 6 percent, they'll put in 25 cents. Over time, that's a lot," says Carson, who began working as a human capital consulting analyst at Deloitte Consulting in Atlanta last summer. "I have student loans, rent (and) credit card bills I'm still paying for, so it's nice to think about being able to have a nest egg and the money I'm keeping."


Show Bankrate's community sharing policy

Connect with us