You’ve graduated from college and settled into your post-collegiate independence. Perhaps you’re married and starting a family (or at least worrying about it). But you’re never very far from friends, a good bottle of wine, and many late night conversations about where your future’s headed.

The one thing you and all of your friends agree on? Nobody has any idea what to do about retirement. 

How to Save (When There’s Nothing to Save Yet)

Whatever you do, it’s probably not helpful to Google, “How much money should I have saved by the time I’m 30?” Reading articles like that will require more bottles of wine. 

It may seem hopeless facing the idea of catching up to where you think you should be. But instead of focusing and stressing on something theoretical, sit down and calmly ask yourself, “What small actions can I take now so I don’t have to worry as much in the future?” 

Making the decision to start stashing away money for retirement when you’re in your 20s or 30s isn’t easy, especially when it feels like you have so little leftover to begin with. You likely won’t be able to max out your 401k contributions, but there are some simple ways to control what you do now that will allow you to start saving for later.

Face Your Spending

Most people have no idea how much they spend monthly. They may know what their rent costs or how much their gym membership is, but the highly variant, one-off expenses like sunglasses or appetizers that happen with little thought are rarely considered.

Utilizing a budgeting app that can help get a sense of your spending habits and cashflow. On many budgeting apps, you can upload all your bank accounts, debt, and credit cards and they will automatically categorize each transaction. You can then see how much you’re really spending on clothes, food delivery, or nights out with friends.   

Analyzing your personal finances can bring clarity on where your money is really going and help you establish a budget you can actually stick to going forward. 

Pay Down Debt

Debt is something to take very seriously, as having debt can impact different aspects of your financial health. 

Paying down high interest loans or credit cards first can be a healthy starting point. There are also certain debt consolidation programs that can be helpful in getting you organized, but be extremely careful about the fine print or hidden fees that can cost you. 

Automatic Contributions – Forget About Saving

When money just sits in your checking account, are you more likely to spend it? (Yes.) Making a conscious decision to move money into a savings or investment account each month is no fun. But automatic contributions strip the hassle and thought process out of the equation, making the transition more seamless. 

Even if the amount seems small right now, setting up automatic contributions establishes good habits and takes the pressure out of making the decision to save money. You can slowly increase the amount over time, and when you see your savings account growing month after month without really feeling any pain, it reaffirms your decision to save. 

401k Contributions – It’s Free Money

Unable to max out your 401k contributions? Don’t feel bad! Most people early in their careers can’t either. So how do you decide how much to contribute? 

Many companies offer some form of a matching benefit. This is a specific dollar amount an employer promises to contribute to an employee’s 401k when the employee makes a contribution. For example, employers may offer to contribute a dollar-for-dollar amount up to a specific percentage of the employee’s compensation (i.e. 5%). 

The first step is to see if your company offers matching contributions and how much they’re willing to match. Then see how much you’d need to contribute to get the maximum employer contribution. 

Say you earn $50,000 per year. Your employer offers 5% matching. You would need to contribute $2,500 per year to receive the maximum employer matching benefit. Your $2,500 ends up being a total contribution of $5,000! It’s free money! Plus, the amount you contribute to your 401k reduces your taxable income, which means you pay less taxes! 

Emergency Plan – Expect the Unexpected

Medical bills come out of nowhere: for you, your spouse, your pet. Your car even gets “sick” and needs an unexpected “checkup.” You get stressed in your job and think about leaving it. Life events creep up without notice fast. Having an emergency fund in place lets you handle meltdowns with more clarity than if you have no backup plan in place. 

First, your emergency fund should be a savings account that’s kept completely separate from the checking account you use to pay for everyday bills and expenses (and from your other savings goals).

Next, is the decision of how much to save. The standard is to have between three and six months of expenses stashed away in case of emergency. If you’re just starting out, give yourself a year to build it up. Set up a monthly automatic transfer to your savings account in the appropriate amount.

Knowing you have safety and security behind you will take the sting out of having to invest so much time figuring out what you spend every month! 

Understanding Your Options

The sheer volume of information about retirement from human resources (much less the internet) can be overwhelming and confusing. Often it seems easier to avoid the subject than actually take advantage of the available benefits. But it’s incredibly important to know and understand the different types of savings paths available to you, and how each will help to maximize your money (and ultimately maximize your values).

Most of us spend years in high school learning how to do algebra, conjugate verbs, and survive gym class. But the majority of us were never taught much about budgeting, saving, or taxes. Just know a little education goes a long way and that financial advisors at Abacus are here to help when you have questions. Schedule a call today.