Save for Retirement When You Live from Paycheck to Paycheck

If you are living paycheck to paycheck and wonder how on earth you can save money for retirement, take heart -- it can be done. Consider the stories of ordinary people, often public school teachers, who lived frugally and left large sums of money to the schools with which they were associated. Lately the stories come from people like Miriam Hawes of Columbus, Ohio or Laura Bickimer of Cleveland. These women may inspire anyone who wants to save for the future while living on a meager salary.

Saving for retirement when you are living paycheck to paycheck may not be easy, but it is possible. If you are in this category, you need to think about retirement funding only after you get the paycheck-to-paycheck issue under control. Then you can use your "new found" money to fund your retirement account.

Unless you are in especially strained circumstances, almost all workers can find ways to save money. Start by examining every purchase or expense to see where your money slips away.

Where does your money go?

Track daily expenses for a week or a month. It is amazing how little things like picking up a newspaper or magazine, buying a couple of sodas or snacks from a vending machine, lunch out or drinks after work can begin to add up to real money.

Examine life's little luxuries that became essentials. Start with cellphone bills, cable bills and gym membership fees. How much is going each month toward things you may not really need, or worse, don't use? Is this money you could apply to your retirement goals?

Watch out for those interest charges, late fees and hidden expenses

  • Pay off your credit card bills before you even begin to think about anything else. The interest alone may be a significant amount you can deposit in your IRA. The same is true of car loans and your home mortgage, if you have one. As soon as one loan is paid, apply that amount to the next loan until you are debt free. Part of a successful retirement is to owe no money on the day you retire.
  • Check alternatives to the bank fees you currently pay.
  • Pay all your bills before they are due. You'll save money each month just by avoiding the late fees.
  • If your credit score is below par, work to improve that. You'll save money on insurance if you have a good credit score.

A lot of our money just seems to vanish, and we have no idea where it goes. When average wage earners begin to see how much they can save each month, they get excited about their new financial independence. When you have your spending under control, max out your contribution to your company's 401(k) or open a Roth IRA on your own.

There are no complex financial theories here -- just spend less than you make. Whether you endow a scholarship fund or your own retirement -- or both! -- with your accumulated wealth, Ms. Hawes and Ms. Bickimer would be pleased.

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