7 Ways to Save For Retirement on a Tight Budget

save for retirementHow can we save for retirement on a tight budget? Is it really possible? Many people turn to a retirement planning advisor for advice, but it is important to know how to budget while paying into a retirement scheme.

These days it can be tough enough just to pay your bills and support your lifestyle. Saving for any purpose – especially one as far into the future as retirement – can seem like more than you can handle. But here are seven ways to save for retirement on a tight budget. Pick one or more of them, and see what you can do to start building up your retirement savings.

1. Use Small Payroll Deductions Direct Deposited into Your IRA or 401(k)

When it comes to saving for retirement, the most important step is just getting started. But that step doesn’t have to be anything big. If you have been an unable to put any money into retirement up to this point, you can be on your way simply by direct depositing $10 out of each paycheck into a traditional or Roth IRA. You probably won’t even notice that it’s missing from your paycheck.

Once you get started with that very small amount, you can increase the amount of the contribution each time you get a raise in pay. Or you can increase it as you get better control of your budget. Saving money and watching it grow is one of the best ways to motivate yourself to create and maintain a budget that cuts expenses for yet more savings.

2. Have Your Income Tax Refund Direct Deposited into Your IRA

Of course it’s too late to do anything with your tax refund right now, but when you file your income taxes again in the spring, instead of having your refund mailed to you or direct deposited into your checking account, have a direct deposited into your IRA account.

By doing that, you will jumpstart your retirement savings with a large chunk of money. Even more important, since the transfer will be directed into your IRA, you’ll never see the money, and you’ll never miss it. Mission accomplished!

3. Transfer Any Windfalls You Receive Into Your IRA

Just as you could do with your income tax refund, you should make it a practice to put any windfalls that you receive into your retirement account. This can be bonus income from your job, and large gift from a family member, or even the extra income you earn from doing some sort of side job.

This is another way to jumpstart your retirement contributions. And if you do it once, you can do it again – until you eventually get into the habit of creating windfalls that you can deposit into your retirement savings.

4. Redirect Payments to Your IRA From a Debt You’ve Recently Paid Off

If you have been working to pay off debt – and many people plan to do this before they begin funding their retirement – you should give serious consideration to redirecting the money that you save from the suddenly nonexistent debt payments into retirement savings.

The time to do this will be immediately after the debt is paid. You want to do this before the extra money finds its way into your general budget. If you began making those same payments into your retirement account, you won’t even notice that it’s happening because you have been used to making loan payments for so long.

5. Eliminate an Expense and Direct the Money Into Your IRA

If you have no debts, or you have no debt that’s about to be paid off, you can accomplish a similar result by eliminating one or more expenses. A soon as you do, you should continue making the same payment, but make it into your retirement account, either through payroll deductions into your 401(k) or into your IRA.

Let’s say that you have a landline telephone that you are paying $50 per month for. Cancel the service, and begin making $50 monthly payments into your retirement account. There are a lot of possibilities here, including eliminating one dinner out per week, giving up habit, like smoking cigarettes, or eliminating a little used  club membership. This will work with any expenses you eliminate as long as you redirect the money into retirement savings.

6. Cut Your Budget Across the Board and Put the Savings into Your IRA

If you don’t feel comfortable eliminating a single expense, or there are no debts that you can pay off, you could also try cutting your budget across-the-board. If your current household budget is $4,000 per month, and you commit to cutting it by 5%, that will free up $200 per month – or $2,400 per year – to put into your retirement savings.

7. Get a Very Part-time Job

A lot of people find this idea be completely repulsive. But if you have little or no retirement savings, and there really is no room in your budget to find any, you’ll have no choice but to create additional income streams. Preparing for your retirement is sufficiently important to make this extra effort.

This isn’t to say that you have to get part-time job that will have you tied up on weekends and most evenings. You can get a very part-time job, which is to say the kind of job you only have to work one or two days per week. If you make sure that you direct the extra earnings into your retirement account, the money will build up faster than you can imagine right now.

A lot of people have found that they are able to make a significant amount of money on certain jobs, such as delivering pizzas or bartending. Get the kind of part-time job that you can comfortably blend into your regular routine – preferably doing something that you actually like to do – and put it in your mind that you’re preparing for your retirement. That might motivate you to make the extra effort that you will need without feeling so bad about it.

If you can combine several strategies on this list, you may find yourself saving several thousand dollars per year toward your retirement, and building up impressive nest egg in short order.

Do you follow any of these strategies?