2-Minute Money Manager: How Can I Find Money to Save for Retirement?

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about retirement; specifically, how to put aside money for retirement if you’re barely making ends meet.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, check out “5 Things Preventing You From Saving for Retirement — and What to Do About Them” and “Believe It: You Can Save $500,000 in 15 Years.” You can also go to the search at the top of this page, put in the word “retirement” and find plenty of information on just about everything relating to this topic.

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Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Aaron:

“You’re always saying we need to put money aside for retirement because Social Security won’t be enough. But how am I supposed to do that when I can barely make ends meet now?”

Over the 40 years I’ve been offering financial advice, I’ve met lots of Aarons: people who ask some version of “How am I supposed to save when I have more month than money?”

OK, let’s talk about that.

Reaching your goals, step by step

If you want to reach a goal, the first step is having one.

What’s a goal? A goal is something specific and clearly defined that you intend to accomplish by a certain date.

Another critical goal component? Desire. You’ve got to really want it.

Let’s use Aaron as an example and retirement savings as his goal.

Assume Aaron is 40 years old. He has a picture in his mind; something he really wants to achieve. Perhaps he’s decided he wants a retirement spent traveling the world. So, he creates a goal: Save $1 million by the time he reaches 67.

Now Aaron has a specific goal with a specific date. Problem is, it seems impossible to achieve. After all, Aaron wrote saying he can’t save anything. Now we’ve got him saving a million bucks.

Which brings us to step two: Breaking goals down into manageable chunks.

Using one of many available online calculators, we find that if Aaron can earn 10% annually on his savings — the stock market’s long-term average — he only needs to put aside $650 a month to end up with $1 million by age 67. That means he needs to save $150 a week, or about $21 a day.

See how this works? While $1 million sounds like a tough goal to reach, breaking it down into smaller chunks — like $20 a day –makes it appear more manageable.

Still, Aaron’s already said he’s having trouble making ends meet now. Where’s he going to find that $20? That will be the next step.

Tracking expenses

Reaching financial goals invariably means finding the money to do so. And that means tracking expenses and developing a spending plan.

Aaron can’t find his $20 a day until he knows exactly where his money is going now. To find out, he needs an expense-tracking tool, like You Need a Budget or Mint, that automatically tracks every dime he spends.

Once he knows where his money is going, he can make changes in an attempt to find his $20 a day. He can plug spending leaks. He can decide what’s important to him and stop spending on things that aren’t necessary. He can read articles like “11 Ways to Save on Entertainment,” “25 Ways to Spend Less on Food” and “13 Ways to Save Big Cash on Clothing” to learn how to spend less without reducing his quality of life.

If Aaron really wants to achieve his goal, he’ll analyze his expenses and find the extra cash to make it happen. Of course, it’s possible that no matter what he does, there’s simply no way to squeeze extra cash from his budget. As they say, you can’t get blood from a stone.

If that’s the case, then it’s time for the next step …

Making more

There are two ways to get richer: spend less or make more. If Aaron can’t find a way to spend less, his next step will be finding a way to make more.

Making more could be as simple as asking for a raise, or as complicated as getting an advanced degree. One advantage he has over the prior generations: Thanks to the internet, the possibilities for side gigs has never been greater. Articles like “107 Easy Ways to Make Extra Money Every Month” might help him find a little gain without a lot of pain.

The hardest step

The final step in achieving any goal is following through.

Whether it’s losing weight or gaining wealth, the path to success is generally clear. The hard part is following that path, day in and day out, for as many days, weeks, months and years as it takes to reach the finish line.

In Aaron’s case, he may have to keep on keeping on for 27 years. Of course, he can, and should, do what he can to make the path less rocky. For example, he could automate his savings plan by having money removed from every paycheck. He could radically reduce the amount he has to contribute by getting matching money on his employer’s 401(k). He may get raises along the way that could swell his savings and get him to his goal sooner.

But no matter what he does, reaching his goals will require perseverance. Without it, he’ll fail. Which is why it’s so important that any goal you choose is one you really want.

Hope that answers your question, Aaron!

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About me

I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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