You want to start saving for your retirement, but you’re on a budget. Alarmingly, only about half of Canadians are actively saving for their retirement, and 30% of them have no retirement savings at all. But when money’s tight, the thought of putting something aside can feel daunting.
The single best way to start a meaningful retirement fund is through investing. With the power of compound interest, money you set aside today grows. Without it, everyone would struggle to save for their golden years. Here’s how you can start investing for later in life.
#1 Get Your Debt Under Control
Debt is the biggest obstacle to saving for yourself. Getting it under control will help give you room in your monthly spending to put something aside.
One quick way to do this is through debt consolidation in Canada. Debt consolidation allows you to wrap all of your unsecured credit accounts into a single payment and secure a lower interest rate, or sometimes get it at no interest rate at all. A Debt Consolidation Program is an effective way to access debt relief. You can enter into one with the help of certified Credit Counsellors from non-profit credit counselling agencies like Credit Canada. They will negotiate with your creditors to secure lower interest rates.
#2 Move to a Cheaper Housing Market
Canadians living in hot housing markets like Toronto usually spend way too much money on their rent or mortgage, especially younger people who are only starting their careers. Financial planners suggest that you shouldn’t spend more than 30% of your after-tax income on rent. According to The Globe and Mail, given average rents in the city, you’d have to earn at least $50,000 to be able to save.
Fortunately, work-from-home is now more widely accepted than ever. That’s opening up different housing options for people who would otherwise be facing over-long commutes from more affordable communities.
If you’re looking for other ways to get your budget under control, look into credit counselling in Toronto for more help. Anyone whose budget is suffering due to debt repayments may want to look into ways of paying it off sooner or reducing interest.
#3 Invest for the Long-Term
When you invest in the long-term, you’re making yourself more tolerant to risks. That gives you more opportunity to grow your dollars quickly. The difference between low-risk and high-risk investments is that you’re more likely to lose principal in a high-risk product, such as stocks, but the potential returns are higher.
Stocks vs. bonds are a great example. Bonds are generally seen as a safe place to park your money, but not very lucrative in low-interest environments. The stock market is much more volatile, but the long-term trend is upward growth. If you want to earn higher returns over the long-term, go with the stock market but be prepared to experience short-term losses.
You can save for retirement on a budget. Investing will help you grow your savings year after year and build wealth beyond what you could set aside on your own.