Researchers at the Center for Retirement Research at Boston College recently measured that more than 40% of households may be at risk for seeing their standard of living decline in retirement. They also found that people born after 1955 have an increasing risk of living in poverty.

It is a depressing statistic that should scare you. Four out of ten “retirees” will probably not be enjoying their golden years and may have to continue working just to get by. If you have not thought about or prepared for your later years, there is no better time than the present to start saving and investing.

Since I am not a professional financial advisor or money manager, I cannot give personal investment advice; however, I can give you a starting point on saving and investing so you do not end up being a statistic.

There are many common sense “sayings” about investing and here are some favorites:

1. Invest. You got to be in to win.
2. If you have nothing saved or invested, you will have nothing.
3. It is never too late to start, but the earlier the better.
4. Compounding rocks!

One of the biggest excuses that I receive when talking to people about investing is that they say, “Sure I would love to invest, but I don’t have any money to invest with.” Well, the truth is that we all have money to invest with and it starts with some discipline and sacrifices by savings from everyday expenses. It does not matter that you are only able to set aside $50 a month to invest with. That is where the magic of compounding comes into play.

Okay, where is this extra “found money” to invest coming from? Here is the answer.

Look hard enough and you can find funds available to save and invest with. For many people, there is extra money lying around hidden in unnecessary expenses. The first thing you will have to do is a personal audit of your finances. Make a list of your expenditures, separating the “wants” and “needs” and then see where you can cut back, downgrade, change habits or even sacrificing all together. You will be surprised how easy some of the things are.

Here is a list of things that you can do that will add some bucks to your investing funds.

A. Go Green. One of the major expenses is your utility bills.

1. Buy energy efficient appliances.
2. Replace your incandescent light bulbs to CFLs (compact fluorescent lights).
3. Program and change your thermostat settings.
4. Maintain your weather stripping, insulation and air filters.
5. Make sure lights are turned off in un-occupied rooms or install automatic switches.
6. Do less laundry by having full loads.
7. Lower the hot water heater temperature
8. Find additional ways to conserve water (too many to list and you get the idea)

The average home spends over $1900 per year on electric bills. By doing the things listed above you can save 15-20% on your bill. That translates to an extra $285 – $380 to invest with. Note that savings for going green with water and gas have not even been accounted for which would add additional savings.

B. Save money on your car.

1. Do you use premium gas for an older car? Switch to regular and save at least 10% on fuel costs. That’s about $20 per month if you are currently spending $200 a month.
2. If you have a paid off vehicle, you might want to consider reducing your insurance policy from full coverage or increasing the deductible. This can save you a couple of hundred dollars per year.
3. Keep your car maintained and tires properly inflated to cut down on gas consumption.
   Excessive speeding above 70mph will use more gas because of unburned fuel.

C. Needs and Wants.

1. Do you really need both a regular landline phone and a mobile? Lose the landline can save you $25 bucks a month.
2. Check your mobile phone bill usage to see if you can downgrade the plan if your usage doesn’t require all the bells and whistles.
3. Do you actually watch all the 400 channels available from your cable or satellite service? Get standard or basic services and you can save at least $20-30 per month.
4. Can you do without the $7 cup of java from Starbucks every day? That can be a $140 savings in a 20 business day month or $210 if you drink one every day.
5. Do you absolutely have to see every new movie that comes out or can you just wait until it comes to the movie channels that you have already subscribed to?

These are only “Tips” of the iceberg on how you find the extra funds and money to start saving or investing with. If you can execute the majority of the ideas above, it would not be hard to come up with at least a $100 to $200 per month to invest with. Be creative and you can find even more ways to have that extra investing money.

Power of Compounding

One to two hundred dollars a month may not seem much, but that is where the power of compounding comes into play. It can increase exponentially the earlier you start and the type of investment you make. Taking the example above where you were able to obtain $200 per month in “found money”, gives you a total of $2400 per year to invest with.

Let’s assume you are 30 years old, and each year you continue putting the same $2400 into an investment that is averaging a 15% per year. By the time you reach retirement, the initial amount you had invested and yearly contributions would have compounded to over $2.7 million dollars.

The amount on your return will of course be dependent on the type of investment you choose and how soon you start investing. The longer you wait the more money that you can potentially make disappears. Time is money, so get started.

Editor’s Note: Believe it or not, 15% or more per year is possible. There are a number of funds that have been paying in the double digits for the past 5 years. Some that were closed to investors have now opened up for a limited time for new investors. A good source to find funds and their performance is Morningstar.com.

Thank you for reading this post. You can now Leave A Comment (0) or Leave A Trackback.