Whoever said "Live like there's no tomorrow" probably had trouble paying the rent in retirement. It's sad, but true. There is a tomorrow and ignoring it won't make it go away.
On the flip side, saving for retirement doesn't always mean you're brown-bagging your lunch daily and declining all social invitations. There are ways to increase your retirement contributions without sacrificing your lifestyle. Here are six ideas to try today.
1. Split your next raise
Your annual raise is a powerful financial resource. But it's easy to let that paycheck increase disappear into the vortex of your monthly spending. I know because I've done it. I've even caught myself spending the raise mentally before it's in my bank account.
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You get that promotion, your paycheck rises substantially, and six months later you feel like you don't have a penny to spare.
Here's your solution: Take half of your raise and use it to increase your retirement contributions. If possible, set up the higher retirement contribution to begin in the same paycheck that reflects your new salary. Let the other half of your raise flow into your paycheck to fund your living expenses.
With this approach, you still get the thrill of the higher paycheck but you're capping the potential lifestyle bloat. You also get some help with inflation, even as you're saving more for retirement.
2. Invest your cash windfalls
Cash windfalls aren't just lottery wins and inheritances from distant relatives. Tax refunds, cash birthday gifts from Grandma, bonuses from work, and money you earn selling your old iPhones are all cash windfalls. More importantly, these amounts are all investable.
You can't put this money directly into your 401(k), but you can stash these amounts in an IRA or taxable brokerage account.
Even better, use a brokerage that supports fractional share investing. This is the practice of buying stock shares in fractions. With fractional investing, you can buy a fraction of a stock for as little as $1. That means there's no cash windfall that's too small for your retirement savings.
3. Comparison shop your car, home insurance
No doubt you've seen the commercials of a certain car insurer, promising savings of 15% on your car insurance.
Here's some food for thought. One study calculates the average cost of full-coverage car insurance in the U.S. at about $1,675 annually. Fifteen percent of that is $250.
If you invest $250 a year in an IRA to grow at 7% on average, your balance after 30 years will be roughly $25,000.
Shop around for cheaper insurance, and then invest the amount you saved by switching. It could mean $25,000 extra for your retirement, with zero effect on your lifestyle.
4. Earn credit card cash rewards
Cash rewards on your credit card can fund your retirement, too. Find a card that pays 2% back with no annual fee.
Put a reminder on your calendar to convert your accumulated cash rewards into a direct deposit or mailed check every quarter. Then transfer those funds to your IRA or brokerage account.
5. Get a cheaper smartphone plan
Your smartphone plan may present another easy opportunity to cut back. If you can lower your bill even $10 monthly by switching to a lower-cost provider, that's enough to invest in your future.
6. Exercise at home
If you're not visiting your gym at least once weekly, you can probably spare yourself the membership fee. You could buy low-cost equipment to use at home or find guided workouts for free on YouTube.
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Again, the money you save should go straight into an IRA or brokerage that's earmarked for retirement.
The saving mindset
There is a certain mindset that can help you save without sacrificing your lifestyle. It involves how you view money you don't yet have. Today, you may be viewing future income increases as funding for stuff you want to buy tomorrow -- a nicer car or a kitchen remodel, for example.
But try to develop that perspective into a longer-term view. Yes, your next raise can buy you stuff in the future, but the more important future to worry about is retirement.
If you feel tempted to spend your raises and cash windfalls, divert your attention. Think instead about the fun you'll have as a well-funded senior who doesn't have to work for a living. Master that mindset, and funneling extra cash into your retirement account will be much easier.
