{"id":172,"date":"2007-10-18T12:03:06","date_gmt":"2007-10-18T19:03:06","guid":{"rendered":"http:\/\/www.bspcn.com\/2007\/10\/18\/become-a-millionaire-start-saving-in-your-youth\/"},"modified":"2007-10-18T12:03:06","modified_gmt":"2007-10-18T19:03:06","slug":"become-a-millionaire-start-saving-in-your-youth","status":"publish","type":"post","link":"http:\/\/localhost\/wordpress\/2007\/10\/18\/become-a-millionaire-start-saving-in-your-youth\/","title":{"rendered":"Become a millionaire: Start saving in your youth"},"content":{"rendered":"

Written by Jay MacDonald<\/a><\/p>\n

Being young and financially irresponsible is great fun, but being old and broke stinks.<\/p>\n

Still, that doesn’t mean you have to become a shut-in and put every spare cent into your retirement plan. Tuck away a little bit on a regular basis and you can party when you’re 19 and 99.<\/p>\n

The turbulent 20s, that sometimes pleasurable, often painful transition from carefree adolescence to responsible adulthood, is admittedly a difficult time for anyone to focus on saving for retirement.<\/p>\n

“It’s tough to start talking too many numbers with young people because a lot of times they’re also overwhelmed — it’s their first job, their first real paycheck, their first apartment, their first time dealing with health insurance,” says Derek Avdul, financial consultant and author of “Real Life 101: The Workbook.”<\/p>\n

“When you have all these variables going on and they’re trying to be grown-ups, retirement just takes a back burner for a lot of them.”<\/p>\n

Small sacrifices
<\/strong> Saving a little bit each month from the time you are young doesn’t require great sacrifice, yet it can make the difference between prosperity and poverty in the second half of your life.<\/p>\n

Put retirement front and center<\/p>\n

1. Cut the financial umbilical cord<\/a>
2. Make affordable sacrifices<\/a>
3. Women: Pay close attention<\/a>
4. Make it, but don’t take it<\/a>
5. Don’t pass up free-money 401(k) plans<\/a>
6. Live within your means<\/a><\/p>\n

The reason their parents’ generation continues to harp on it, with the best of intentions of course, is that many of them wish they’d started saving earlier, when they could have made smaller sacrifices and let compound interest do the heavy lifting. Compound interest, you may recall, is interest that is calculated on the initial principal and the accumulated interest of prior periods.<\/p>\n

But that sage advice, as sound as it is timeless, still mostly falls on deaf ears.<\/p>\n

“You can’t talk to them about 30 years from now and how compound interest is going to benefit them, because, as we all know, at that age you know a lot more than anybody older than you and you’re not going to need retirement money because you’re going to make it big on your own,” Avdul says.<\/p>\n

Cut the financial umbilical cord
<\/strong>Unrealistic money expectations are rampant among young people today, according to author Nicholas Aretakis, who interviewed hundreds of 20-somethings coast to coast for his tough-talking survival guide, “No More Ramen.”<\/p>\n

“Why don’t they save? The short version is, they never had to do it before. Their parents, the baby boomers and just after, have done so well economically that they’ve never had to have a budget before,” he says.<\/p>\n

“The problem is, when they’re living at home, they take for granted that room and board is free, transportation is relatively free, most of their expenses are gratis on the parents, so they’ve got that financial umbilical cord. When they do break out on their own, they find out that everything has an associated cost. It’s a really tough concept for them that they just got done with college and they already have to save for retirement, so some of them are frozen in time and they just don’t start saving,” Aretakis says.<\/p>\n

Make affordable sacrifices
<\/strong>Peg Downey, a fee-only Certified Financial Planner and partner in Money Plans, of Silver Spring, Md., says it only takes a small lifestyle adjustment early on, not a major commitment, to get this saving party started.<\/p>\n

“If they just saved what they spend everyday at Starbucks, they would have a million dollars right there when they retired,” she says. “It’s phenomenal.”<\/p>\n

Maybe not a million — but a half million, easy. Why quit the daily stop at Starbucks? You can brew that good stuff at home much more cheaply.<\/p>\n

Let’s say that, beginning at age 25, you put the equivalent of seven $4 grande lattes a week toward retirement, setting aside $121 a month. If you invest it in a stock mutual fund with annualized returns of 9 percent, you would see $23,415 after 10 years, $80,814 after 20 years, $221,520 after 30 years and a whopping half-mil, or $566,440, when you retire at age 65.<\/p>\n

Similarly, you can add even more to your retirement funds if you routinely set aside the price of small purchases.<\/p>\n

Small trade-offs to make for future security:
<\/strong><\/p>\n