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How to Save for Retirement When You’re Young and Broke

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Let’s talk retirement.

Retirement is not a fun topic, but it is necessary, especially for millennials. No one really taught us about retirement before or after graduation, so it’s up to us to educate ourselves.

Say you graduated college with the average student loan debt of $30,000. You find your first job that pays $32,000 (again…an average). Your student loan payments for a 10-year payment plan are around $400/month. Your salary means you bring home around $2,600 (that isn’t including taxes). Assuming 25% of your pay goes to taxes, you bring home right at $2,000 a month.

If you’re bringing home $2,000 a month, nearly 1/4 of your take home pay is going to student loans. Then you have other expenses, such as rent, utilities, car payments, insurance, an emergency fund, and food. There isn’t much left at the end of the month. How can you be planning for retirement when you literally have no extra money left?

Because it’s overwhelming, it can be tempting to avoid thinking about retirement at all. When you just entered the workforce, you can’t fathom to think 40+ years in advance to retirement. And there are so many unknowns about the future. Will we have social security benefits? Likely not. What will the inflation rate be? Hint – $100 today won’t get you too far in 40 years. You need to save even more money to plan for some unknown future.

But instead of focusing on what we do not know or what we can’t control, let’s focus on what we can do right now to plan for retirement. Because, believe it or not, you can and you need to start saving today.

Decide what priority is most important right now

When you have a relatively small income and a lot of debt, you don’t have much extra money to work with.

Like the example above, trying to pay for everything on a small budget when you just graduated is extremely challenging. You can’t be expected to save thousands for retirement when you’re making an entry-level salary, and even more so if you have student loans. Retirement is extremely important, but the good news is that you DO have time to save more.

Start by freeing up as much money as you can in your budget. Then prioritize where any extra money should go. If you have a massive amount of student loan or consumer debt, maybe that should be your focus right now instead of planning extensively for retirement.

If you have a manageable amount of student loans, consider what would be the best option for you. If your student loans have a relatively low interest rate, you might be better off financially to invest any extra student loan payments into a retirement account that would earn a higher (and long-term) interest.

Keep in mind that money is not black and white. Retirement, paying off debt, and being able to afford to live are all important. You can’t focus on one entirely and ignore the others. You need to find the balance that works for you.

Take advantage of employer sponsored retirement plans

Most companies offer a retirement plan of some sort. If yours doesn’t, and you are a full-time employee, consider finding a new company that does, and start your own IRA. Because it is a huge benefit to you!

A 401k with your company is simple enough to start. If you’re unsure, just contact your HR or Benefits Manager and they’ll help you out. You can easily have money deducted out of your paycheck and directly into your retirement account every month.

So, what’s an employer match? A match means your employer will contribute whatever you put into your retirement account, up to a certain percentage. Every company is different, but to use as an example, say your employer will match up to 5%. If you make $32,000 a year and put in 5% of your own salary into a 401k, you will have $1,600 in your account. Then your employer will contribute an additional $1,600, making your account hold $3,200. Then, of course, you earn money on this through interest 🙂

But say your employer will match up to 5%, but you only put in 3% of your salary. You put in $960 a year, and so does your employer. So you essentially are losing out on $640 worth of free money from your employer.

If you’re really unsure about where to start saving for retirement, make it your goal to save at least the full amount that your employer would contribute so you are taking full advantage of what your employer is offering. Don’t leave any money on the table.

Remember, retirement will have to be your #1 priority at some point

Saving for retirement might not be a big deal to you now, but at some point in your life, it will be your #1 priority. If you fail to save now, you’ll be desperately saving later in your life.

It can be hard to imagine, but we are in an age where pensions are rare and social security is not promising. Any retirement you hope to have is your responsibility.

And doesn’t it break your heart to see elderly people working still because they failed to plan out their financial future? I don’t want to be working when I’m 70, or even 50! I want to be retired and enjoying my life, free from work.

Make more money

If you think the possibility of making more money is out of your control, you are wrong. Once you start realizing you have control of not only your spending, but your earnings, your life will change.

If your job doesn’t offer a retirement program or doesn’t pay well, always remember you can find another job. It might take some time, but you are not bound to any job, unless it’s a contract.

Side hustling is another way you can make a lot of money quickly. There are limitless possibilities on how to make money on the side of your full-time job. Maybe you want to dog sit, nanny, work in a restaurant, restore cars, do woodworking, sew, or be like me and blog and freelance on the side. You’d be amazed at how much you can earn!

Unless you’re working 80 hours a week at your full-time job, there really isn’t an excuse to not start a side hustle. Even if your side hustle is making $50 tutoring for one hour a week, you’ll earn an extra $200 a month, which could even pay for your student loan payment. It really isn’t hard, in fact, many people I know turned their side hustle into a full-time job because they loved it and had more opportunity doing it.


To sum up retirement (and you’re like, why did I read the whole article when the final point is right here?)

  • You need to save now. You might not be able to save a lot now, and the good news is you do have time to save more. Even saving 1% of your salary now will help you in the future.
  • Finances are all about balance. You can’t focus on just one aspect at a time because you have more than just one priority. You may have to focus on paying off debt or increasing your income before hardcore saving for retirement, but you should always be saving something for retirement.
  • Don’t leave money on the table. Aim to save enough to get your employer to match your retirement contributions at the very least.
  • Remember, you have complete control over your finances. You can earn more money or you can blow all your money. If you aren’t where you want to be financially, you have to look at yourself.
  • Remind yourself of what retirement actually is.By saving now, you’re putting money away to stop working and travel the world if you want. By not saving now, you’re setting yourself up for a lifetime of work ahead of you, even when you’re old.

How do you save for retirement? 

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