You can put away a nest egg even if you don’t make a lot of money, experts say
By Deborah Jeanne Sergeant
Most financial advisers have tips for people with impressive portfolios and a lot of money.
But for those who don’t have a lot of liquidity — people who are on a budget — it’s still possible to save for retirement.
“Most people are not on a budget, so they don’t know they have extra money,” said Cynthia Scott financial adviser and owner of OMC Financial in DeWitt. “Many people live on credit cards and when you charge things, it doesn’t seem like you’re spending money. You can’t have liquidity for investments until you sit down and design a budget to see where you can cut down and reduce so you have liquidity for an IRA, Roth IRA or a private investment account.”
By knowing how much money you have and how you spend it, it’s easier to set aside money to invest.
“Most people who have impressive portfolios have always diligently known where their money went and made sure they saved along the way,” Scott said.
But if you lack a time machine to go back to your 20s and start investing, there’s still hope, local experts say. Especially at this point, you have to evaluate your budget.
“Create a spending plan,” said Terri Krueger, chartered financial consultant and owner of Krueger Advisors, LLC in Syracuse. “I liken it to the holidays and birthdays. They’re not a surprise; we know they’re coming but we don’t plan for them.
“If you create a list and decide how much you want to spend on each person, you can calculate it out to what to save for each month. The same is for car repairs. We know we’ll replace the tires, brakes and oil changes, yet we act as if these are surprises. We know we’ll have to spend $500 or more a year. Prorate it out for 12 months and set up an account.”
But Krueger’s planning isn’t just about brake jobs and wish lists. She also encourages clients to have a “fun account” to spend on whatever they want, such as going out to dinner or shopping for things that aren’t necessities (unless the person has no savings at all). Planning for some fun helps keep budgeting from feeling like drudgery.
Another strategy she endorses is using a credit card to track expenses and rack up points to use for gift cards. The money to cover the balance must be in the checking account.
“It’s wise to put an app on your phone where you can look and see where you are,” she said. “If the cash isn’t in the account to pay off that card, stop spending.”
Krueger recommends keeping in the bank — and not investing — at least six moths’ upcoming expenses, including home improvements, vacations and purchases like a new car. That does not include living expenses.
She also encourages delaying collection of Social Security to obtain the maximum benefit and reduce tax obligations.
Krueger is a big believer in seeking personal advice from a qualified financial adviser, as they can address the specific needs of an individual’s situation.
It may seem too late to save for retirement. However, Randy L. Zeigler believes that it’s more about consistency than anything else.
“If one can save some money from each paycheck, even a small amount, then anyone can build long-term savings and investments,” Zeigler said. He works as a certified private wealth adviser, certified financial planner, chartered financial consultant and private wealth adviser, Ameriprise Financial Services, Oswego.
Like Krueger, Zeigler advises building up the cash on hand for emergencies above routine expenses before making any long-term investments.
“Employees should attempt to contribute systematically to their employee retirement plan, especially if it includes a matching contribution,” Zeigler said. “Why ever turn down free money?”
