Too many Americans delay saving for retirement at the start of their careers. Maybe you feel a little silly squirreling away a mere $25 or $50 a month. Maybe you reason you’re better off waiting until you can make larger, more meaningful contributions. But it’s more important to start early than it is to start strong. Thanks to the miracle of compounding interest, those dollars you save first will work for you the hardest.
Here are my three best tips for getting started on the road to retirement.
Enjoy the process
If developing a budget feels like a chore, you simply won’t do it. But when you see budgeting and planning as real steps you’re taking toward your dreams, it changes your perspective. You don’t have to be a numbers person to enjoy that. Be thorough. Know where every dollar you earn winds up. Look for ways to reduce or eliminate expenses. Get in the habit of asking, “Morning Starbucks run… or retire sooner?” The goal isn’t to stifle all purchases. Rather, the goal is to prioritize your spending. What things, services and experiences are most important? Which charities (and alma maters) mean the most to you?
Have more than a plan. Have a strategy.
As you earn more and advance in your career, your savings strategy should evolve, too. After a pay raise, consider dedicating part or all of it to a 401(k) retirement savings plan. We often find we don’t miss what we never had. But raises won’t be the only things to influence your savings plans. You may change or lose jobs, buy a home, have children or face an illness. You may get off track from a specific plan, but if you have a larger strategy, you can adapt to change and prioritize your long-term goals. A good strategy gives you something to come back to.
Football coaches talk about “being multiple.” What they mean is that they have a lot of ways to get where they’re going: up the middle, around the ends and over the top. You can be multiple in saving for your goals, too. Eliminate expenses by dropping unnecessary services such as extended phone, internet or cable packages. Adjust your auto or health insurance to match your needs. Walk or bike when you can (which will probably lower your health care costs in the long run). Then increase revenue by picking up a part-time job or subletting a room. Pursue the experience and education you need to increase your earning power. Your liberal arts versatility will help you reach your goals.
Thom Jackman is associate professor of business administration.