Between student loans, rent, car payments, and a multitude of other expenses, it can be difficult — and even painful — to watch your paycheck disappear as quickly as it came. More often than not, my first few years in the “real world" were lived paycheck to paycheck.
I'd been told to save and invest for my entire life. It sounded smart, but I only had $50 left over each week. I wish I knew then what I know now: You don't need thousands of dollars to start investing for your future. There are a few simple strategies that can make a world of difference.
Even investing a little in your employer's 401(k) can put you way ahead.
It's a no-brainer, and a convenient way to save. Many companies offer retirement accounts to their employees as part of their benefits package. You can elect to set aside a certain percentage of your paycheck to automatically be contributed in that account and start growing. Even better, many employers offer a match up to a certain point. For example, if you contribute 3%, your company will match it by paying 3% as well.
Example: If you make $730.00 a week (my starting salary in 2012), 3% is close to $22. With a company match of another 3%, you're being given another $22.00 just for participating each week. Now let's expand on this. If I had maintained those contributions for the next 44 years (until age 66, full retirement age), and earned an average rate of return of 6%, I would have earned over $400,000. Albert Einstein famously said, “Compound interest is the eighth wonder of the world. He who understands it earns it…he who doesn't…pays it."
If your employer doesn't offer a 401(k), you can put small deposits into an IRA or an investment account. While setting up an automatic deposit of even 3% doesn't seem like a lot, over time it can grow enough to enable you to put a down payment on a home, start a business or take the vacation you've always wanted.
You have an investing advantage: time
As both a millennial and a financial advisor, I understand the struggles and dilemmas members of my generation face. How are you supposed to get ahead when you're barely getting by? The answer is simple: a little bit at a time. Even a small contribution each paycheck to either an employer retirement plan or individual retirement account can set you up for the future.