Can’t save – think again!
It is pretty common for Millennials to be financially strapped so any ideas about saving seem ridiculous. Retirement seems so far away, we don’t see the urgency in putting money away now.
Look at the table below and it's pretty easy to understand why time is of the essence:
To accumulate $1,000,000 by age 67
So to have a million dollars at retirement, which isn only about 50,000 per year while we're retired, we can start putting away $93/month at 18. If we wait until we're 30, then we'll have to put away $500/month to reach the same goal.
So before we allow ourselves to get bogged down by the size of our goals, we must remember that no one else will do this for us. Our life expectancies are long, and you have to start now or else you'll never be able to retire.
We must think it terms of “How can we…,” instead of “There is no way…” You can either settle for putting in the minimum amount of work and be stagnant or seek better opportunities. One important thing to remember is that all growth, including monetary, happens outside of the comfort zone. If we are comfortable, the chances are we are not growing ourselves or our income.
When we're looking work, we should know how much money we need to have a surplus every month for emergency savings, mid-term investments and wealth building accounts. The rule of thumb is to save 10% of our income from the start and gradually increase it to 20%. What happens is that we tend to accept the first job we can get, we earn just enough to make ends meet, we put off saving and investing until we make more money, we buy things beyond out purchasing power on credit cards and, when we do get more income, we are so far behind that we still cannot afford to save. If we are not making enough, whose responsibility is that?
Even when we earn more, we tend to spend more. While it is important to pay the bills, the most important bill we must pay first is ourselves. So we must set out to save and invest 10% of our income and adjust our bills and our lifestyle to live on 90% of what we make.
It is a financial paradox, but unless we make a decision and implement savings program, no matter what our income is, we will spend it all.