After my first summer job as a day-care assistant in high school, I followed my father’s advice and opened a Roth IRA with a $250 deposit and rosy dreams of retiring at 30 years old (hey, I was 16!).
Being somewhat of a perfectionist, I didn’t take this responsibility lightly. I knew from my dad’s ongoing retirement lectures that to retire at all, I would probably have to contribute significant money for years to come.
With that in mind, I made a promise to myself: As soon as I got my first salaried job (that would of course net me six figures per year and be hopelessly fabulous), I would start maxing out my Roth IRA. Between the time I opened the account and the time I started that job, I would contribute what I could, which ended up being another couple hundred dollars each year. While it wasn’t much, every dollar was a dollar closer to being able to retire.
Flash forward seven years, when I landed my first salaried position as a PR associate for a gross income of $28,000—which, after taxes, left me with just under $2,000 per month to live on. Needless to say, my career was anything but “six figures and hopelessly fabulous.”
It’s hard enough to just get by on $28,000 per year in Atlanta—even harder to save the just around $420 a month it would take to max out my IRA at $5,000 per year. (The 2013 limit is now $5,500 per year.) I knew that I’d have to put forth herculean effort to achieve this goal, but I somehow made it happen, and I’ve managed to max out my Roth IRA three out of the past four years. And, despite the fact that my salary is nearly double what it used to be, I still live my life by the principles I share below.
If you feel like I did—like you couldn’t possibly save for retirement, because you just don’t have any money—you aren’t alone, and it isn’t impossible. This is how I did it, and how it may be possible for you too.
1. Change Your Priorities
The truth about living on a small salary is that you should prioritize what you truly need and want, because a limited amount of money only goes so far. If you don’t prioritize actively, you will probably do it subconsciously, meaning you’re likely to prioritize what feels good and is convenient, rather than things that require greater planning.
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For my first year in my salaried job, my priority was to max out my Roth IRA. This was no mere dream, or a hope that the money would show up somehow. It was a deliberate choice. Making saving a priority (the priority) meant that not only did I cut back on the obvious financial drains like dining out and clothes shopping, but I had to overcome my subconscious priorities, the ones I didn’t even realize I had—like maintaining appearances.
Six months into my new lifestyle, one of my girlfriends got married out of state and invited me to the nuptials. I totaled up the cost of the weekend affair, including plane tickets, hotel room, rental car, food and gifts: roughly $1,500. It would have been so easy to say yes, suck up the costs and go have a good time. I wanted to do what was expected of me by the bride, my friends and my ego. But I also knew that it would take away from honoring my priorities.
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So I didn’t go. I saved instead. The bride was understanding, but it didn’t soften the blow I felt to my ego. With mixed emotions, I sent along a card and a gift certificate to a store on her registry, knowing in my gut that it was the right thing to do. When you have decided that saving is a priority, your goal may come at the expense of some obvious—and some not-so-obvious—lifestyle choices. You should prioritize saving anyway.