If saving money for retirement was easy, then everyone would be a millionaire overnight.
The truth is, it takes patience, determination and sacrifice. And a lot of hard work.
I know what you’re thinking: I don’t have time to work on my retirement. I get that. Some of you are working two jobs already and barely have time to do laundry or talk to your spouse. But some of you do have time to put in some extra work on your retirement—you’re just spending it elsewhere (like binge-watching your favorite show).
Maybe you’re wondering: Would the extra time and energy pay off? In the business world, that’s called the return on your investment (ROI). Some activities—like collecting and recycling aluminum cans—might not add much to your retirement account, even though you’d spend a lot of time on them. But some actions will give you a good return for the investment of your time. Here are three actions to consider.
Sell Some Stuff
I know, I know, you don’t have time to sell stuff. Okay. So rather than sell stuff, you’re willing to let the credit card company charge you 18% interest every month? Let’s say you owe $8,000 in credit card debt—the national average, according to Motley Fool. If you pay $300 a month on that debt, it’ll take you 33 months to pay that off. And you’ll pay almost $1,800 in interest.
What if you took the interest alone, put it into a mutual fund at a 10% return rate, and left it there for 30 years? You could make over $30,000. If you paid off that debt, you could also put that $300 credit card payment toward your retirement. After 30 years at that same 10% rate, you could have over $680,000 total ($650,000 plus $30,000). Boom! Now that TV show doesn’t seem quite as important.
Put down the remote, get off the couch, and get rid of stuff. Nicer stuff goes to an online shopping site. Less expensive stuff goes to a garage sale. Junk goes to the dump. Repeat the process every couple of years as you accumulate again.
ROI: $30,000 to $680,000
Dust Off Your Insurance Policies
You know those commercials that talk about saving an average of X dollars when you switch car insurance companies? There’s some truth to that, but only if you take the time do the research. According to J.D. Power, only 33% of consumers shopped around last year to get the best deal. Those who switched are saving an average of $356. (When you decide to shop around, make sure you’re comparing apples to apples—the same coverage from different companies, not full coverage from one and basic coverage from another.)
Is it worth your time? If you put that $350 in a mutual fund each year (because you’re saving that much every year, not just the first year), getting a 10% rate of return over 30 years, you could have almost $63,000. And that’s assuming you never compare insurance rates again. But wait! What if you checked on bundling insurance, too? According to InsuranceQuotes, consumers save an average of $295 when getting their car and homeowner’s insurance from the same company. Let’s add that to the $350 you saved on changing carriers. That $650 (roughly), stashed in a mutual fund each year for 30 years at 10% growth, could put an extra $117,000 in your account. I’d say that much money is worth the time it takes to do research and get quotes.
ROI: $63,000 to $117,000
Invest Your Income Tax Refund
According to the IRS, the average income tax refund was around $3,000 in 2015, which is on par with other years, give or take a few hundred dollars. What should you do with that money? If you’re debt-free with an emergency fund of three to six months’ worth of expenses, you might want to consider adding it to your retirement fund. Using the same time frame and rates of return, that $3,000 alone can grow to $52,300.
But don’t stop there! We don’t want you to have such a big refund, because it’s just an interest-free loan you’re giving Uncle Sam. Adjust your withholding (the amount of federal tax that’s taken out of your paycheck) so you’re bringing home more of your income. When you do, you can put $250 ($3,000 divided over 12 months) into your retirement account instead! In 30 years (again at a 10% return), you could have almost $525,000.
ROI: $52,300 to $525,000
If you’re not comfortable making these money moves by yourself, that’s okay. That’s why we ask the pros for direction. If you need help with investing, taxes or insurance, go to my website and click on “Dream Team” in the menu bar to connect with professionals in each of those areas.
Remember, retirement planning takes work and sacrifice. But if you invest your time now, you could end up with a lot more money later—and you will have plenty of time to enjoy it. I’d say that’s a good return on your investment.