6 Tips for Saving for Early Retirement

There are two aspects to successfully saving money for early retirement. One is to minimize living expenses as much as you comfortably can, and the second is to save religiously and regularly. If early retirement is one of your primary goals, here are 6 tips to help you save money for retirement.

Work at Home. If possible, arrange to work at home. While working at home is not for everyone, it can be a great way to reduce costs and even boost productivity. Potential savings from working at home include: 1. Less wear and tear and mileage on your car, which can sharply reduce your monthly transportation costs and also extend the life of your vehicle, postponing the time when you have to replace it; 2. No monthly parking fees; 3. Lower food bills, since you can eat breakfast and lunch at home, reducing the amount you spend on take-out or restaurant food; 4. Lower clothing bills, because you will need fewer business outfits; 5. Possibly lower car insurance costs since you will be putting fewer miles on your car. Check with your insurance company for possible discounts.

Do Sweat the Small Stuff. We are often told that one way to save money for retirement is to eliminate the little things, like $3.00 lattes, that add up over time. This is good advice within reason. You'll want to balance quality of life issues with ways to live more frugally, but chances are you can lower or eliminate some expenses with little or no overt effect on your daily satisfaction. There are plenty of articles and websites on the internet with tips for living more frugally, such as renting movies instead of seeing them in theaters and buying only used, never new, cars. Check them out and decide which steps you want to take to cut your daily expenses. As you make changes, direct the money you save into your early retirement savings account.

Be a Loyal Shopper. One way that many corporations compete today is by rewarding their best customers with discounts and additional benefits. Therefore, it can pay to give your business to fewer companies and to join shopper loyalty clubs (which generally are free). This also applies to savings accounts. Banks and brokerage firms often offer special perks to those with the most assets at their institutions, so rather than spreading your business around, concentrating it at one or two companies may save you money on commission rates or qualify you for higher interest rates. One caution about concentrating too much money in one place-be aware of limits on how much money is federally protected in the event a financial institution fails so that you can take these rules into account when deciding where to hold your money.

Put Your Savings on Automatic Pilot. Saving money for early retirement will be easier if you set up automatic investments to savings and retirement accounts from each paycheck. The easier it is for you to save the more likely you are to stick with a savings program.

Maximize Savings Matches. Don't overlook a significant freebie offered by many employers-- matches for all or part of 401(k) contributions. If you put $1,000 in a 401(k) and your employer contributes a matching $1,000, it is like getting a $1,000 pay hike or bonus. Sure you can't spend it on a vacation or put it toward a new car, but it is even better, since it puts your one step closer to achieving your goal of early retirement.

Purchase Stocks through Direct Stock Purchase Plans. If you want to invest some of your retirement savings in individual stocks, consider taking advantage of direct stock purchase plans, where possible, and avoid using a broker. Not all companies offer direct stock purchase plans, but many of the largest companies do. Each plan will have its own rules, so you will need to do a little homework before getting started. A few of the advantages of direct stock purchase plans (which may not apply to all) include lower or even no investment costs (since some plans do not charge a fee for purchasing stock), the option of automatic investments (such as $50 per month debited directly from your bank account each month to buy additional shares), and dividend reinvestment in the shares.

Source:

Michael Robinson, www.getrichslowly.org, Direct Stock Purchase Plans: A Better Way to Invest