My friend has a $50,000 student loan, which he is paying off as fast as he can with every penny he can scrape up.
“Every day that I owe that student loan, I pay $6 in interest,” he complained. “That’s a six-pack a day — $42 a week that I could be spending on something else — something fun.”
Like retirement. My friend’s not saying that, but he should be because one of these days sooner than he thinks, retirement, especially if he can afford to live well, will be a lot of fun.
Forgoing lattes to retire rich
A 25-year-old who saves $6 a day, just one less six-pack or latte, will accumulate about $1.2 million over 50 years, says Chris Carosa, author of “Hey! What’s My Number?” and chairman of the board of Bullfinch Fund.
“By then, 70 is when people will retire,” Carosa says. “The beauty is a 25-year-old has the advantage of time,” he adds.
Follow three more pieces of his advice if you are starting out young to save for retirement:
- Work for a company that has a 401(k). At a minimum, a competitive employer ought to be offering the mechanism to save automatically, and it’s not too much to also expect a 6 percent match on your savings.
- Make it automatic. Let your employer increase your savings level the longer you work and as your salary goes up.
- Find a savings mentor. Pick somebody that you trust who is knowledgeable about saving and investing.
“The key to success is self-discipline,” Carosa says. “And that can be a challenge for someone who has just graduated from college and is enjoying newfound freedom. But think about: Becoming a millionaire is worth it.”
Read about the 5 worst money blunders made by millennials.