To begin with, the general recommendation has typically been to contribute at least 10 percent of your paycheck to your retirement plan. In addition, it's also advised that a 10 percent increase should be made once you reach the age of fifty. That savings amount of 20 percent should ensure that, by the time you do retire, you'll have enough money to live on. However, with today's financial situation (and even before this time, actually), many people cannot afford to put away 10 percent of their money, much less double that amount.
However, if you begin with a 5 percent contribution and then increase it by 1 percent each year, the shock to your wallet will not be nearly as dramatic as if you started with 10 percent. Your net paycheck will not significantly decrease, and you'll be in a much better position to budget accordingly.
But, make no mistake, saving money does require making a few sacrifices. First, a budget is highly recommended so that you can ascertain how much money you can comfortably put into a savings or retirement account. Some people put away $25 a week; others can only manage $5 weekly. Taking into account housing expenses, food, utilities, clothing, gas, a car payment, school tuition and supplies for the kids, and any credit card debt, you may find that your budget doesn't yield any extra money.
Unfortunately, many folks today live from paycheck to paycheck. If you're a member of this vast group, what can you do? What if you don't have a retirement plan? Well, the main thing is to begin, wherever you are, by putting some money away.
For instance, most banks have Vacation- or Christmas Club accounts. Let's assume that you open a $5-a-week Vacation Club. By the end of the year, you'll have socked away $260. If you commit to depositing $10 a week instead of $5, you'll have amassed $520. Not too bad, right? Or, if you can swing it, put $20 every week into that account. By the end of the year you'll have saved $1040, and that doesn't even include the interest earned. Perhaps your employer can separate the money from your paycheck and automatically deposit it into the account for you.
The secret here is to decide on an amount of money that you can put away weekly without feeling the pinch too terribly. It's not required that you start with a hefty sum; only that you start. Add a column to your budget that's labeled "Christmas Club," "dollars-away" or "rainy day," whatever you choose; and then figure out, after all the bills have been paid, how much you can easily put away into that account.
In the beginning, for most people, it's not about how much you should save, but that you can faithfully put away a set amount each and every week. Once you develop this habit, it'll quickly become a part of your lifestyle. And when saving is finally a component of your mindset, you'll be able to easily locate ways to save more and more without very much strain at all. When that happens, you'll find yourself well on your way to a comfortable and financially secure retirement.