Top ‘Money-Wasters’ Keeping You From Saving for Retirement

Senior Finance Advisor
Jul 9 · 3 min read

Updated on Jul 08 2019

Saving for retirement may seem out of reach when as many as 40 percent to 75 percent of Americans say they are living paycheck to paycheck or that they would struggle financially if faced with an unexpected expense of $400. The truth is that many Americans may feel as if they are living paycheck to paycheck, but a much smaller amount actually are.

Learn how limiting spending on ‘wants’ can make a big impact on retirement savings.

Taking Advantage of Compound Interest

When it comes to saving for retirement, refraining from spending money frivolously can make a big difference. When you choose to spend responsibly and save more in a compound interest earning account, your investment can really add up over time. Compound interest is interest calculated on the initial principal, which includes all of the accumulated interest of previous periods of a deposit or loan. For example, a deposit of $10,000 with a 5 percent interest rate will put the closing balance at $10,500 at the end of year one. In the second year, the opening balance of $10,500 will earn $525 in interest and the closing balance at the end of year two will be $11,025.

Many Americans feel as if they are living paycheck to paycheck, but experts question how many truly are. A recent study from CareerBuilder found that 9 percent of respondents who earned at least $100,000 annually said they lived paycheck to paycheck. With plenty of income, it would seem the problem is not that Americans are not making enough, but rather that they are spending too much.

Top 10 ‘Money-Wasters’ to Eliminate from Your Spending

Consider limiting your spending on these ‘money-wasters’ and investing wisely in an investment account that will pay dividends in retirement:

1. Restaurants

Eating at restaurants and drinking fancy coffees is a luxury. Plan your meals and grocery shop to save money. Ultimately, your budget (and your waistline!) will thank you for it. And, if you regularly purchase lattes, consider pocketing the cash instead of indulging in your daily habit. If you skip your daily $4.00 coffee and invest it, you could see $121,000 after 30 years, assuming a 0.5 percent monthly interest rate.

2. Transportation

Cars and trucks depreciate drastically in value. In fact, the data shows that cars can lose as much as 10 percent of their value during the first month after you drive off the lot and as much as 20 percent in the first year. Consider buying a cheaper, used car and saving the difference.

3. Missed Opportunities

Small missed financial opportunities can add up over time and have a real impact on retirement savings. This would include not taking advantage of company contributions on 401(k) plans, withholding too much from a paycheck for taxes, and not investing in a tax-free Roth IRA.

4. Education

Of course getting a good education is crucial to quality of life and even a predictor of financial success. However, the affordability of a college is often overlooked or sacrificed because of the reputation of the school. Strongly consider a good state school or make sure you have a solid plan in place so that you don’t mortgage your future in school loans.

5. Vacations

Everyone needs a little rest and relaxation but consider how much you are willing to spend on vacations before committing to a stressful venture that will put you in debt. Consider alternating years for big family vacations, taking a road trip, or having a staycation in an effort to save a little more for retirement.

Get Expert Advice for Retirement Planning

Spending money cautiously now can truly make a difference for future retirement savings. Living within your means and saving as much as you can as early as possible can relieve financial anxiety in retirement. If you need help creating a budget and developing a financial investment strategy for retirement, contact a fiduciary financial advisor. An expert can help you conduct a financial goals assessment and create a budget that helps you meet those goals.


Senior Finance Advisor

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