There’s perhaps no morning ritual we look more forward to than cozying up with a cup of coffee (although right now, we’re all about enjoying it on ice!). But often, financial advice points to the fact that if you give up your daily cup, you could save thousands and thousands of dollars over time. In fact, a recent Vanguard blog post found that if you ditched a $3.50 coffee every day and invested that money instead in a diversified portfolio earning 6% a year, you’d rack up $100,000 in 30 years. That certainly sounds like a great chunk of money for retirement.
But as a recent TIME.com article points out, people often sensationalize the financial benefits of foregoing your daily fix. Besides, even if you set out with that 6% per year portfolio, what are the odds you’d be cool with skipping your caffeine jolt for 30 years? We can barely go a week without the stuff! Instead, TIME points out three smart and savvy ways to save for retirement.
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1. Let your money work for you — on autopilot.
“Make your savings automatic by arranging to have a percentage of pay go directly from your paycheck into a 401(k) or similar retirement account,” TIME recommends. Some employers will match your 401(k) so look into your options and see what works best for your current financial needs and long-term goals.
2. Get a head start on saving early in your career.
“Compounding is most effective over long periods of time, which is why failing to save in the early years of your career can leave you with a much smaller nest egg than if you had gotten a leg up on your savings effort,” TIME points out. Though it’s never too late to start saving, the sooner you start, the better.
3. Crank up your savings rate!
Even if you can only swing to save a little more each year, over time, it really does add up. “The final way to make compounding work more in your favor is to save more. The more money you put away, the bigger the investment gains that money will generate and, in turn, the bigger the gains on your gains, leading ultimately to a larger nest egg,” as TIME explains. Bonus: We all know that life doesn’t always go according to our grand ole master plan. So boosting your savings rate a bit helps give you a little extra to fall back on in case you need it.