If you don’t have much in savings and don’t have an aggressive investment plan in place, now is a perfect time to figure out how to put away money and let it grow for you.

Whether you are in your 20s or 60s and no matter how much you have or haven’t saved, there are ways to improve your financial position.

First things first

Without a budget that works for you and an emergency savings fund to protect that budget from unexpected expenses, your plans to invest more money are likely to fail.

When life throws you a bill or expense that you didn’t expect and can’t put off and you don’t have an emergency fund to draw from, you have to borrow the money. For most people, this means higher interest rates. It also puts a strain on your finances because the regular payments you must make to pay off the loan or credit card balance represents an additional monthly expense. By the time you get one financial catastrophe paid off, it’s likely that you’ll face another.

Get a budget

Paying off your high-interest debt and saving money for emergencies should be your two biggest priorities. If you aren’t sure how to accomplish this, you need a budget.

It doesn’t matter if you use an app on your phone or print out a budget template. Without a budget, your money doesn’t know what to do. You’ll lose sight of your big-picture goals without a plan.

Dump your debt

It may seem like a big job, but you must rid yourself of high-interest debt. Your money should be working for you. If you are paying interest on the debt, your money can’t do its job.

Improve your credit scores

So many aspects of your financial life depend on your credit scores. Your car and life insurance rates, whether you can get security clearance at your new job, your interest rates on car loans and mortgages, and whether you qualify for the best rewards credit cards all depend heavily on your credit scores. People with poor credit pay more for a lot of things. This leaves less money to invest.

A two-part plan for “finding” money to save and invest

There’s lots of information online about how to spend less money. Living frugally is the subject of much discussion. There’s also a lot of information out there about how you can make more money. Side gigs, part-time jobs, and even just getting rid of your stuff are all viable ways to earn extra cash.

Make fast progress toward your investment goals by spending less money and making more money

To succeed, you may have to put up with some trial and error. There isn’t a one-size-fits-all answer to the question of how to make more money. Here are some ideas to explore in case you need inspiration:

• Ask for a raise and more responsibility at your current job
• Get a part-time job on weekends that pays tips, like delivering pizza or serving food at an upscale restaurant
• If you have a late model vehicle and it suits your personality, drive for Uber or Lyft
• Work for your neighbors walking dogs, shoveling snow, or mowing yards
• Teach a class at your local community college as an adjunct professor
• Referee local high school sports

When it comes to spending less money, the first step is understanding where you currently spend your money. Look at past bank statements and credit cards. Can you eat out twice a week instead of three times? If so, put the savings toward paying down your debt or add it to your emergency fund.

When was the last time you shopped around for a better rate on insurance or a lower cable bill? Have you considered giving up cable and using streaming TV, instead? Cancel your subscriptions. If you miss them, you can always renew.

With a budget that works in place, an emergency fund and a shrinking pile of debt, you will have removed the obstacles that prevent many people from succeeding as investors.

How young people can build wealth

For those in their 20s, a high income and investments that create passive income are usually just a dream. You may be in school, recently graduated and facing an entry-level position, or working hard to prove yourself in a new job.

If you’ve been living like a student, spending every penny of your paychecks probably seems like a well-deserved break from a low-income life. You may still be on a tight budget, but the money you make from a full-time job is hopefully enough to pay your bills and leave some leftover for fun and savings.

Get a budgeting app that works for you and that you genuinely like. Try You Need A Budget (YNAB) if you’ve decided to make living below your means and saving money priorities. There may be a bit of a learning curve, but once you acclimate to a new way of thinking about your money, you can prioritize saving, which leads to building wealth.

If investing is a mystery, check out Acorns, Stash, and Robinhood. TradeHero lets you play around with fake money so you can get some experience before using your real cash.

You may be starting a family or working hard to grow your career or both. Your 20s and 30s can be an expensive time. Try not to worry about comparing yourself to your peers.

If you don’t have a budget that is helping you effectively tell your money what to do, finding one right now and using it could change the trajectory of your financial future.

Before you make major purchases like a home or a new car, think carefully about the associated debt. Home ownership isn’t the right situation for everyone. Renting may be more expensive in the short term, but unless you are confident that you’ll live in the same place for many years, buying a home could be a serious drain on your finances, preventing you from investing your money.

If your employer offers a matching 401(k) contribution, put as much money as necessary into that fund to get their maximum match. So, if your company matches 50% of your contribution up to 3% of your salary, direct at least 3% of your salary to the 401(k) plan so you can collect an extra 1.5% of your salary.

For investments other than your company-sponsored 401(k), it’s vital for you to find a financial planner you like and trust. Make sure they aren’t selling a specific financial product. Now is the time to solidify your long-term savings plan, and you may need help to do so.

Practice saving for short-term goals

Saving for a financial goal that’s decades away is something most people can’t manage. To get good at saving and investing, you must practice the habit.

Before you can be a successful investor, you need money. Set a short-term goal that you can achieve if you stay focused. When you reach your goal, invest the money in a brokerage account.

Continue to save at the same rate but make the deposits automatic. You’ve proven that you can save money while keeping all of your bills paid on time, so put it on autopilot. As you receive raises and bonuses at work, add the extra cash to your automatic savings.

While your account grows, learn more about investing in specific funds. Explore your personal interests and find out if they align with a particular type of investment.

How to build wealth if you have the sneaking suspicion that it’s too late

If you haven’t saved money throughout your life and feel like you don’t have time to take advantage of compounding interest or buy stocks and ride out the ups and downs of the market, you aren’t alone.

55% of baby boomers have retirement savings. 45% of this age group, the youngest of which are about 65 right now, haven’t saved anything for retirement. Of those who have set aside money, only 42% have more than $100,000 saved for their futures.¹ Because the maximum monthly Social Security payment is $2,861 in 2019¹ and more than 10,000 Americans turn 65 every day in this country,¹ there are a lot of folks that will live on less than $34,332 per year.

Only 20% of 40-year-olds in America have the recommended retirement savings account balance of $100,000 or more. 50-year-olds with a retirement benchmark of $212,000 are behind as well. Only 22% of them have reached that level of savings.¹

Retirement lasts a lot longer now than it did in the post-World War II era. Today’s adults are likely to live 10-25 years past the time when they stop working. It’s necessary to prioritize saving and building wealth if you want to enjoy an income that will support a comfortable lifestyle later in life.

A somewhat unconventional point of view on retirement

While retiring at 55 or 60 may sound incredible, it’s important to ask the big question: what then? If you expect to live 25 to 30 years longer, you’ll not only need a massive pile of cash to draw from; you’ll need something to do.

One can fish, play video games, travel, or enjoy a hobby for a while. Eventually, retirees are often left searching for something more to do with their vast amount of free time.

One way to stay financially healthy in your later years is to keep working well past “normal” retirement age. If you can continue to make enough money from a job to support yourself until your early 70s, you’ll receive 132% of the retirement benefit from Social Security that you would get if you retired at 66. Past the age of 70, there’s no penalty for earning over a certain amount.² This frees up more money for saving and investing later in life.

For example, a worker who chooses to retire at age 62 will receive only 70% of their Social Security benefit. If they retire at age 67, they’ll receive 104% of their benefit amount.²

If full-time work past retirement age isn’t possible, consider taking on a side gig, consulting, or getting a part-time job. Any money you add to your income at this point takes the pressure off your budget.

Contribute to retirement accounts no matter your age

People older than 50 get a $6,500 “above the line” tax deduction if they contribute this amount to an IRA. Even if you can’t put together enough money to invest in other areas, make this a priority. By setting aside $542 each month, you’ll get a big tax break.³

Roth IRA contributions are made after taxes, but they also grow tax-free and account owners won’t pay taxes on withdrawals. A 50-year-old who has a before-tax-income of $50,000 per year who contributes $542 each month to a Roth IRA that gets an average interest rate of 6% will have $244,000 in their account at age 70. They’ll save $32,932 in taxes.³

No matter when you begin investing, if you have your financial house in order and have removed common obstacles to saving money, you’ll be successful.

Choose to invest in financial products that will safeguard your money while it grows. If you make smart moves with your money now by learning as much as you can about your various investment choices, working with an advisor you trust, and automating your contributions to savings, you’ll be well on your way to securing your financial future.

References

1. Are We in a Baby Boomer Retirement Crisis?. Investopedia. https://www.investopedia.com/articles/personal-finance/032216/are-we-baby-boomer-retirement-crisis.asp. Published 2019. Accessed February 15, 2019.
2. Early or Late Retirement. Ssa.gov. https://www.ssa.gov/OACT/quickcalc/early_late.html. Published 2019. Accessed February 15, 2019.
3. Roth IRA Calculator: Estimate your balance at retirement | NerdWallet. Nerdwallet.com. https://www.nerdwallet.com/investing/roth-ira-calculator. Published 2019. Accessed February 15, 2019.