Stashing money for retirement hasn't exactly been my forte over the past six years. The financial crisis, housing market collapse, and ensuing recession have taken a toll on our family finances. This doesn't mean that I've given up completely on retirement planning though. Rather, I'm taking this apparent pause between bubbles, recessions and crises, to try to come up with a plan to jumpstart my retirement savings.
One of the best ways I've come up with in the current economic environment or (since I don't really trust this stock market rally to continue for too much longer before a popping bubble or government inefficiency destroys it) is to pay off debt.
My wife and I worked hard to pay off tens of thousands of dollars in student loan debt during our first years after graduation. We remained debt-free after that by limiting credit use, building an emergency fund, and utilizing a budget…at least until we bought our first home. At that point we took on more debt than either of us had ever encountered. We had a 15-year mortgage of $165,000 at 5.375 percent interest. During our mortgage, we made extra payments toward this amount, and even signed up for a bi-weekly mortgage payment to help us make extra contributions toward paying off our mortgage early.
However, our greatest move in helping us ditch this debt was through downsizing. We moved from our single-family home to a condo that was half the purchase price of our previous home. Since we had paid more toward that initial mortgage, we were able to salvage some of the principal (even after the housing market collapsed) to help us purchase our second home outright. Not only did this help us avoid the tens of thousands of dollars associated with mortgage interest on the loan, but we did without all those additional fees - application fee, underwriter fee, appraisal fee, etc. - involved in obtaining a mortgage to begin with.
Aiming for extra income
Every little bit counts when it comes to my retirement planning. Even setting aside an extra $100 a month adds up to $1,200 a year. This amount invested each year at just a 4 percent annual return over the next 30 years could provide an additional $65,000 in retirement savings.
Therefore, lately I've been doing what I can to try to pull in a little extra cash here and there. Whether it's reselling the baby's lightly worn closing for an extra $40 at our area Once Upon a Child resale shop, selling back some old books at the area Half Price Book store for $30, or learning how to sell my first item (on my own, not through an eBay store) on eBay for $7, I'm trying new and different things to try to pull in a little bit of extra cash to put toward my retirement.
Continuing to cut costs
But making a little extra cash isn't the only way to help fire up my retirement savings. Continuing to look for ways to cut costs can help me stash a little more away each month as well.
While reselling items can be a great way to earn some extra money, using resale rather than retail for buying goods can also be a great way to cut costs and add saving on the expense side as well. Personally, we save hundreds of dollars each year through buying many of our books, video games and toys for the kids, and clothing for the family through resale venues. This helps us keep our clothing budget for a family of four between $300 and $400 annually, and reduces our budget for things like home furnishings, jewelry, and similar items significantly.
In these ways, I'm working to jumpstart my retirement savings. And while initially my efforts might only add up to $100 here or there, I have to start somewhere, and over time I hope that these numbers will begin to grow.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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