You’re young, just getting started in your career and marriage, and you have lots of bills to pay.
Who has extra money to save and invest for retirement? That’s something you think about when you’re at least 40, right?
That’s absolutely the wrong mindset, according to Lynnette Khalfani-Cox, The Money Coach and author of 10 best-selling personal finance books. “When I talk to couples that have been married for decades, they universally say they wish they had saved more and saved earlier,” she says.
You and your spouse may even be able to retire early if you make a commitment now to follow these six smart ways to save and invest to accumulate wealth.
You both should save and invest early in your marriage—and by early, we mean at the beginning of it. Time is your best friend when it comes to growing a retirement nest egg that allows you to one day comfortably quit your job. A well-known example from personal finance expert Suze Orman explains why it is so important to start saving for retirement in your 20s. She explains that a 25-year-old who invests $100 per month in a Roth IRA with a typical return on investment will be a millionaire based solely on the funds in this one IRA by the time they hit a retirement age of 65. Someone who waits until age 35 to start investing the same amount per month will only have $300,000 in savings by age 65. That’s 70% less money!
Live On One Paycheck
Assuming both you and your partner are working, you should aim to live on one paycheck and funnel the other one into paying off debt or saving for retirement, according to husband and wife team Julien and Kiersten Saunders, digital entrepreneurs and authors of “Cashing Out: Win the Wealth Game by Walking Away.”
Living below your means is a way to free up extra funds to pay toward credit card debt. Having that additional paycheck also allows you to save for unexpected expenses, like a failed car transmission or a whopper vet bill.
Manage Dual Careers In A Smart Way
Both you and your spouse don’t have to be climbing the corporate ladder to save successfully. As Forbes points out, most people get rich from being an entrepreneur, not from investing in the stock market.
“We recommend couples manage their careers in a way that puts one person’s focus on growing the stable income and the other person’s focus on developing a core set of skills that supports an entrepreneurial endeavor,” the Saunderses say. “This allows couples to maintain stability and build an exit plan (aka either retire or quit your day job) on your own terms.”
Get A Boost From Your Employer
Sign up for your employer’s sponsored retirement savings plan if it has one. In the United States, 67% of private companies offer their employees access to a retirement plan. Among the largest companies with 500 or more employees, that number jumps to 91%.
“You can’t afford not to save,” says Khalfani-Cox. “You get a boost by lowering your taxable income with your contribution.” For example, if you make $50,000 and you contribute 10% of your gross pay, or $5,000, to a retirement account, the government suddenly sees your taxable income as $45,000 so you pay fewer taxes come April 15.
“Many employers match retirement contributions dollar for dollar, which is like getting a 100% guaranteed return on your money,” says Khalfani-Cox. “You can’t get that in the stock market.”
Monitor Your Asset Allocation
“This may sound like a fancy Wall Street term, but it’s not complicated. It just means you want a good mix of investments,” Khalfani-Cox explains. Your portfolio of investments—whether that includes stocks, bonds, real estate or something else—ultimately determines what return, or the amount of money, you make over time. There is usually one marriage partner who is more risk tolerant than the other, and that’s good because couples need balance. Discuss the options in which you can invest, taking both viewpoints into account.
The Saunders team recommends that members of Gen Z, who reportedly have the most debt growth of any other generation over the last few years, invest in low-cost index funds while at the same time aggressively paying down debt. “When your debt is paid off or income grows, boost your investments in high-growth funds and tech sector index funds,” they say.
Have no idea where to start? Don’t have a clue where to buy your first stock? They have advice for that, too: “Consider using an affordable robo-advisor that offers a variety of funds to choose from.” Some examples of robo-advisors include Schwab.com and SoFi.
This tip is one everyone can do right away. You automatically increase your income when you reduce your expenses. When you spend less money on daily household needs, this “found income” can be used to bulk up your savings.
What are the easiest ways to reduce expenses? Choose substitutions to save money, advises Khalfani-Cox, especially during a time of rising inflation. Always ask: Why am I buying this? Is it a want or a need? Is there a cheaper alternative? Buy generics instead of name-brand products at the grocery store. Carpool or use public transportation instead of driving the car to work each day.
Ultimately, success is about couples getting on the same page. “Not everyone has the same money personality, but that’s OK,” says Khalfani-Cox. “No one has a monopoly on good ideas. The most successful couples have the maturity to recognize that two are better than one.”