Saving money is the goal of anyone who is in the workforce. You always need to stock up for a rainy day. There is nothing better than being able to take care of yourself and your loved ones as you age gracefully into your golden years. Investing wisely and having a Roth IRA account is one of the best ways to get there. And learning how to save money is a skill, not necessarily an inherent trait. With the right coaching and tips, anyone can become a master saver.
The Roth IRA can be an ideal vehicle for saving for your retirement because you can get tax free withdrawals in your golden years, since you are contributing now with after tax dollars. Paying Uncle Sam now is ideal, because you can take out your contributions, if you need, at any time, to take care of debt or buys a house. But, if you are smart, you can leave it in and take out the money after 59 and a half without paying a ton of taxes in your later years.
In the meantime, you want to be able to grow your savings in the appropriate investment vehicles. When you are young, you want to put your money into stocks and take the time to absorb the volatility. While you have time for your money to grow, let it ride in more unstable financial instruments like stocks and you will see a greater overall return over the long haul.
When you get older, you want to move to more stable, less risky places, like bonds and mutual funds, so you can weather the inevitable market downturns. The Roth IRA can be a great idea if you expect your tax rate to be higher in your retirement years than your current rate. As a young, lower-income labor force participation, it makes sense to take advantage of your years as a worker. Forget about the upfront tax savings and let your money grow.
In order to find the money that you need to put into your Roth IRA, you need to learn how to cut back and save money. That means spending less on going out and eating dinner at fancy restaurants. It means cooking more meals at home. It means spending less on fancy clothes and fancy haircuts and learning how to make do with the clothes that you have. It means being able to do simple household repairs yourself around the house and avoiding spending on expensive contractors and handymen.
One of the simplest ways to save money these days is to kill your cable connection. Cutting the cord can saving some cash, if all you want is high speed internet. Then you can use your computer and smart TVs to stream Netflix and other services that will give you the TV shows you want, without loading you up on cable channels you don’t want.
The other benefit is cutting down on televisions watching in general. That extra time could be spent finding ways to make extra money and pursuing a side gig. Those skills can allow you to make a career change later in life or just supplement the income from your first career.