Are you making the maximum annual contribution to your Roth IRA?
If not, then odds are you know that you should be. After all, your Roth IRA retirement savings is tax-free money, making it far more valuable in your golden years than your 401k or Traditional IRA.
So why do so many people fail to build up their Roth IRA savings? The most common excuse is, “I just don’t have the money!”
But most likely, you do have the money, you’re just spending it on other things. So let’s examine seven easy ways you can cut the financial fat and save a few extra bucks to contribute to your Roth IRA:
1) Downgrade Your Internet Package
Unless you’re downloading three full-length feature films per day, odds are that you’re not using all the bandwidth you’re paying for. A few years ago, we downgraded our Internet service with our cable provider to a cheaper package that supposedly offered less bandwidth, but we’ve never noticed a difference in service.
Our savings? $15 per month. That’s an extra $180 per year for our Roth IRA. If all you do on the Internet is surf the web, send email, and check Facebook, then you probably don’t need a deluxe Internet package. Ask your provider if they have a lower, unadvertised rate. Trust me, it’s worth it!
2) Switch To Generic Brands
Buying generic can save you a fortune. For instance, I drink a lot of caffeine, and Diet Coke is my preferred method of consumption. I average about one 2-liter per day. A few years ago, I switched to Kroger’s Diet K, saving us approximately fifty-cents per 2-liter. Again, that’s around $180 per year.
Now, that said, I understand that some people have an affinity for certain name brands. Sometimes the brand name taste is superior to the generic. If you just can’t give up your favorite tasting name brand foods, that’s understandable. I’m just asking you to be aware of the price you’re paying. You may not want to go generic on all your food purchases, but is there really a difference (other than cost) between Advil and private label Ibuprofen?
3) Use A Cash Back Gas Card
Find a credit card that gives you cash back on gas purchases and use it only for gas. Some cards give you 5% cash back, but they usually limit you to a specific gas station chain. For years, we used Chase Freedom which gave us 3% cash back on gas purchases at any location – so we could pick the lowest price station and get a 3% discount.
After Chase Freedom changed its cash back gas purchases to a quarterly plan, we started using Amazon Visa which gives us 2% cash back at any gas station (plus we got $40 for signing up). Meanwhile, the Chase Freedom card now gives us 5% off at any gas station in July, August, and September. By using cash back gas cards, we easily save over $100 per year.
4) Stop Using Stamps
In an age of online transactions, there’s really no excuse for using unecessary stamps. If you’re still paying your bills by writing a check and mailing it in, you’re throwing your money away. Aside from the added advantage of convenience, paying your bills online or through ACH saves you money on stamps, checks, and fees.
For instance, in many states a $3 surcharge is waived for car insurance premiums paid through automatic draft (ACH). Many companies offer similar discounts for paying bills online. Our family saves about $100 per year this way.
5) Increase Your Household Efficiency
Increasing your household efficiency can save you a lot of money in utility costs. For instance, we live in an older house (1950’s era). The HVAC systems are older and the windows aren’t energy efficient compared to today’s models (or really compared to anything!) However, when we bought weather stripping for the windows and doors, we found we used far less natural gas and electricity to heat and cool the house. And that results in direct savings for our bottom line!
But even if you live in a new home, you have plenty of options for increasing your efficiency. For example, several years ago we switched out all our incandescent light bulbs in favor of compact fluorescent light bulbs that use less energy and last longer. In fact, our electric bill decreased 25% after we installed the new CFLs, and I just recently replaced our first one after four years of use. When it comes to light bulbs, LEDs are another option. They’re more expensive, but highly energy efficient.
Need more ideas? Try following grandma’s advice and turn out the lights whenever you leave a room, and don’t leave the TV on when no one is watching it. All in all, we save about $500 per year by implementing household efficiency measures, and that’s a good chunk of change for our Roth IRA!
6) Use A Top 3 Categories Cash Back Credit Card
Some credit cards will give you 3% to 5% cash back on every dollar you spend in your top three spending categories. In most cases, these categories include groceries, utilities, cable provider services, retail/specialty shops, and other types of spending you do anyway.
If you pay for your groceries, utilities, and cable each month, you can generate a lot of cash back rewards. For instance, someone spending $800 a month on these categories and earning 5% cash back will save $40 per month (or $480 per year)!
7) Save All Your Change AND $1 Bills
One Cent at a Time readers believe in slow and steady accumulation of wealth. Here’s an idea that we haven’t actually tried ourselves (we purchase everything with a debit card so we can easily track all our expenses), but I’ve heard a number of people swear by it.
If you spend cash, start saving all your loose change and $1 bills. This saves money in two ways. First, all those dollar bills and loose change add up. Second, you think twice before spending anything. Why? Because everything costs at least $5!
For instance, let’s say you want a $1.25 pack of chewing gum. Since you’ve prohibited yourself from spending $1 bills and loose change, you need to shell out a $5 bill to buy it. And when you get $3.75 in change, it goes into your savings. If you’re disciplined enough to try this out and stick with, you’re going to save a lot of money.
If you’re not maxing out your annual Roth IRA contribution, no more excuses! The number of ways you can save money are nearly endless if you commit to meeting your goals. In fact, oftentimes you can save money with zero impact on your current standard of living if you just pay attention to what you’re doing and remain alert to the deals and discounts at your disposal. And if you commit to using those saved dollars as a mechanism for funding your Roth IRA, you’ll end up much better off in your retirement years.
Britt Gillette is the creator of Your Roth IRA, an online resource for helping you understand and manage your Roth IRA. You can follow him on Facebook.
These kinds of list bother me especially lines like “If you’re not maxing out your annual Roth IRA contribution, no more excuses! The number of ways you can save money are nearly endless if you commit to meeting your goals. In fact, oftentimes you can save money with zero impact on your current standard of living if you just pay attention to what you’re doing and remain alert to the deals and discounts at your disposal.” Saving your dollars and coins only works if you don’t have set fun money, the rest many frugal people already do. And frankly, that is the audience on this blog. I am not maxing out my Roths, not because of excuses but because of lack of money. I and my husband are students and have a very limited amount of funds.
Ginger I fully agree to you. You don’t need to penny pinch if you budget, set aside fun money and set up automatic payments to retirement/investment accounts. That’s actually good use of your time as well.This was just the guest poster’s opinion which is presented in this post.
Edward Antrobus says
I’m currently in a promotional period where my ISP plan is cheaper than the lower level. But after that, I could save $10/month but would only get 10% of our current bandwith.
You’ll start earning blog money. Put it all here, can’t you?
[email protected]&More says
I actually just maxed out my Roth IRA today! I just use automated investments out of my paycheck to get the job done!
That’s the best way or, my way of contributing maximum to my retirement saving accounts.
Mr. Pibb isn’t generic perse, but when I lived in the south I found it was often cheaper than Dr. Pepper and tasted equally as amazing.
I have the lowest possible internet package I can, but I found out that sometimes they will give you the standard modem, which can’t handle the package you’re paying for, and still charge you for the premium service, which you’re not getting because the modem can’t handle it. So there’s something to ask your provider. Because they don’t already rob us…
A modem hardly costs $50. Renting it from your internet service provider is letting a robbery to happen on your finances.
Marie at Family Money Values says
Of course, no matter how much you save from your expenses, if you don’t actually then put that money into your IRA, you still aren’t saving it!
Had too much wine Marie? 🙂
Elizabeth @ Broke Professionals says
Great tips – you really thought out of the box here. Question for you – do you know if that Chase gas card had any annual fees?
Plain and simple, I wouldn’t advice a card which has annual fee. Chase freedom is not actually a gas card, it’s all purpose reward card, that I am very happy with. Off course this is fee free.