if you’ve read my blog before or any personal finance blog within the last say…ever, you probably have seen these headlines. They say things like, “Most Americans don’t save enough for retirement” or that “The Average Baby Boomer Only Has $25,000 Saved for Retirement.”
Why do these headlines matter so much to me? Because I know what it’s like to not have any money. I tend to ask myself what would retirement look like when you haven’t saved and are just living off social security.
Want to know what retirement looks like if you haven’t saved? This isn’t what you’ve seen from your grandparents, who likely had pensions on top of decent social security checks. You should see how many seniors live in poverty and how too many rely on social security for 90% of their retirement income.
If You Have a One-Bedroom Instead of a Studio
Don’t make this mistake too many times in your life. Scurry for apartments, eventually finding a studio for $475 a month and a one-bedroom for $625. The studio is breezy, clean and has a landlord who really cares about the property. Let’s say, just one thing it was missing? A dishwasher.
In fact, the idea of not having a dishwasher bugs you so much that you end up going with the $625 apartment. You convinced yourself that if you didn’t have a dishwasher, you’d eat out more and not want to cook as much.
I’m not sure if that’s true, but what you do know is that you could have saved $150 a month for that year – almost $2,000 total. You were not contributing to your retirement at all during that year so $150 a month would’ve equaled 6% of your gross income (give or take, hypothetical). If you had invested that money for one year, you would have $2,359 right now – a profit of $500. Stupid dishwasher.
If You Eat Out Several Times a Week
This one probably sounds petty. “Come on Jason, so what if I get McDonald’s a few times a month? How does a few quarter pounders hurt my retirement?”
Here’s how. The average American eats out four times a week. A typical fast food meal costs about $8 – but that doesn’t include if you ate out at a nicer restaurant or also grabbed a beer with your meal.
If you ate out four times a week at $8 a meal, that’s $128 a month. If you save that money into a retirement account for 40 years, you’ll have more than $300,000. I know, I just blew your mind on that one.
If You Bought a New Car
This might be the dumbest mistake on the money. That’s because choosing not to eat out requires tons of micro-decisions throughout the week, but buying a new car is a big deal and something that you should avoid.
Again, let’s do the math. If you buy this year’s most popular car (a 2016 Honda Civic) and take out a loan for the full amount, you’ll owe $395 a month at today’s interest rates.
But if you invest that money over 40 years, you’ll have almost $1 million saved for retirement! Holy Fuck (I know) $1 million dollars and who says you can’t save to be a millionaire.
Or Do What You Want
I’m not saying don’t buy a car or ever eat out or rent a one-bedroom apartment. You can do whatever you want. But you should know what you’re giving up every time you make a financial decision. Unless you’re ok with living in Section 8 housing in retirement and not being able to visit your family, you should start saving for retirement now.
Now, I’d love to hear from you, perhaps your experiences on this subject.
What part of this conversation was most impactful for you? Leave a comment below and let me know.
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With that said, “We have great challenges and great opportunities, and with your help, we will meet them together!” – Jason