Fund a Roth IRA
In this article I’m going to share ideas you can use to fund a Roth IRA. With these 9 awesome ideas, you can fund a Roth IRA easily so that you can max out your Roth IRA and work toward reaching your awesome retirement and other financial goals!
9 Steps to Fully Fund a Roth IRA
One of the best ways that most people can work to build long-term wealth—in order to, among other things, retire in comfort and dignity—is to fund a Roth IRA every year. And by that, I mean to fully fund a Roth IRA.
As soon as you have contributed enough money to your company retirement plan (if you have one available to you) to receive the full company match , then you should also set up a Roth IRA and max it out or invest enough in your Roth IRA and 401(k) together to save 10 to 15 percent of your income (work toward 15 percent as you are able if you feel you can’t afford to contribute that much right now).
Imagine with me for a minute what a comfortable retirement will look like for you and your spouse. Maybe it’s owning a vacation home at the beach or in the mountains. Maybe it’s being able to travel regularly. Maybe it’s being able to buy the fancy car you’ve always dreamed of owning. Maybe it’s being able to fund college educations for your grandchildren. Maybe it’s being able to give large amounts of money to causes you really care about.
So what is it going to take to be able to achieve those dreams? Here are 9 ways that you can reduce your spending so that you will have at least $5,500 more in your budget to be able to fund a Roth IRA and get you closer to retiring with a big pile of cash saved up! So what are you waiting for? Let’s get started saving in your Roth IRA! 🙂
1. Save money on your grocery spending.
The first place you should look for extra money to fund a Roth IRA is your grocery budget.
That is because one area that most families can cut back on is grocery spending. According to the December 2017 USDA guidelines for food plans for making meals at home, our family is way more than thrifty when it comes to our grocery spending. We normally spend about $350 a month on groceries. But I also acknowledge that this, like many areas, is one where we consciously work to keep our spending down.
In my mind, it just doesn’t seem worth it to spend hundreds of dollars more on something that you will consume in a matter of minutes and then have only a faint memory of the taste of. (Even if it was the most tender, best-tasting steak or the sweetest, most indulgent dessert!) Personally, I would much rather spend money on things that have more concrete, lasting value, like saving for retirement or kids’ college or paying for my car with cash or paying off the mortgage early! 😊
For the thrifty plan, for our family of five (three young children and two adults), the suggested amount that we spend was (rounded to the nearest dollar) $660 a month. They do say that this is for a nutritious meal plan, and I admit that we don’t eat as healthy as we could—we could definitely eat more vegetables—if I could get the kids (especially the oldest kid!) to eat them.
Of course we could spend more on groceries—we could buy steaks and salmon and shrimp and fruit out of season and all those kinds of things more, but again, there are so many other things I would rather spend my money on than fleeting food, which is consumed and then gone. I think most families could save at least $100 a month in this area without too much effort. Read this article to find more than 70 ideas for how to save money on groceries.
Savings = $1,200 per year+
2. Spend less money eating out.
The average American family spends about $300 per month eating out. That seems so high to me, because we spend less than $350 per year eating out (see my comments above about the fleeting nature of food). If you could limit yourself to eating out at a pretty good restaurant twice a month, at $75 each time for your family, you could cut that $300 to $150, and invest the rest into your Roth IRA. Or spend $40 a week at a less expensive restaurant and get the same result. Or spend just $50 a month at an inexpensive restaurant, and have $250 a month to invest for retirement!
So turn eating out as a family and going out to lunch or buying fast food for lunch while at work back to what it once used to be (and what it is in our household)—a rare treat.
Read this article for more information on how to spend less money eating out.
Savings = $1,800 per year+
These first two items show that as Americans we spend an inordinate amount of money feeding ourselves. The way I look at it is this: When you eat even the tastiest meal you’ve ever had, even 10 minutes later you can only vaguely remember the taste of it, if you are able even to do that. That’s one of the reasons that I feel strongly that the area of groceries and eating out are great places to cut your budget and invest and spend money on things that often have more lasting value.
Note: Once you begin investing for retirement, I recommend that you check out a great free app called Personal Capital in order to track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.
This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool and use it regularly! You can sign up for your free Personal Capital account here.
3. Cut your cable or satellite.
Another great way to fully fund a Roth IRA is to look at cutting your cable or satellite service.
I don’t know how many times friends or family have mentioned to me that with hundreds of channels available, they can never find anything good to watch. So why do we pay so much for the privilege to watch TV? Basic cable costs the average U.S. family about $60 per month—over $700 per year. If you cut your cable and went with Netflix or a similar option (or just got movies and shows from the library for free, like we do!), you could save about $50 per month.
Savings = $600 per year
4. Find ways to save on your cell phone bill.
Another place where you can find money to fund a Roth IRA is to look at reducing your cell phone bill.
The average family in the U.S. spends over $1,000 a year (about $90 a month) on their cell phone bill. But you can save a considerable amount if you’re willing to reduce the amount of data you use (or research new data plans with your carrier in case prices have dropped) or switch carriers.
For example, I have been with Republic Wireless for the last two years. They have been a great company, and they are so much cheaper than having service with one of the Big Four carriers. I spend about $13 a month for my smartphone data plan. Isn’t that amazing? Check out their website to learn about their plans and pricing, and start saving today!
If you use more that 1 or 2 GBs of data, also consider Mint Mobile, which offers plans starting with 2 GB of 4G data and then unlimited LTE data for just $15 per month. That’s an incredible deal. Visit their website to learn more.
*IMPORTANT UPDATE*: As of September 2018, we’ve switched to Xfinity Mobile! If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider), and the cell phone plan is potentially virtually free.
Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere!), we pay only $3.16 a month for taxes and fees for each line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month after that, or $45 per month for unlimited.) It’s such an awesome deal!
And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S. You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in learning more or signing up? Use this referral code to save up to $100 when you sign up: 1RQ4SP
Ready to start saving on your smartphone? If you shaved even $40 a month off your cell phone bill, that would be about $500 per year. For more ideas on how to reduce your cell phone bill, read this article.
Savings = $500 per year
5. Save money on clothing and shoes for your family.
Another option for finding money to fund a Roth IRA is to spend less money on clothes.
According to the Bureau of Labor Statistics, the average American family spent $1,803 on clothing and shoes in 2016 (the most recent year available). If you are willing to shop at yard sales and thrift stores (and just not have so many items of clothes and pairs of shoes!), you could pretty easily shave that down to $100 per month, or $1,200 per year. For us, financial freedom is worth wearing some gently used clothing and shoes.
See this article for more information on saving money on clothing and shoes.
Savings = $600 per year
6. Reduce your Christmas spending.
Last year, the average U.S. family spent just over $900 on Christmas. But you can have a great Christmas and spend a lot less than that! If you were able to reduce your spending by $400 you would still spend $500, and if you have a family of five that’s still an average of $100 per person (but of course you need to include a little money out of that amount for gift wrap and Christmas decorations and things like that, as well, so it wouldn’t be quite $100 per person). But that should still be very doable. For ideas on ways to reduce your Christmas spending, read this article.
Total savings = $400 per year
7. Cut your entertainment spending.
You can also save money to fund your Roth IRA by reducing the amount you spend every month on entertainment and vacations.
According to the Bureau of Labor Statistics, in 2016 (the 2016 report was published at the end of August 2017, so it’s the most recent information available as of this writing), the average American household spent $3,160 for entertainment that year. If you trimmed that back just a little, to $2,500 a year, you would still have over $200 a month to spend on entertainment (I assume that includes vacations, but the report didn’t say), which will still provide your family with some wonderful opportunities for fun.
One of the main areas where many families can save a considerable amount of money is with electronic devices and with toys (of all kinds). I know that it’s fun to have the newest iThing or the latest video game or motorcycle or ATV or game system, but so is financial security! So is watching your debt go away and your net worth grow! And so is doing one of many, many free things (here I list over 90 of them!) that don’t involve gadgets or toys at all.
Even if it’s for your kids, you can refrain. I know for some of us it’s harder saying no to our kids even than saying no to ourselves, but even fairly young children can understand why you can’t buy something if you explain that you’re working toward other important goals instead. In fact, I know of instances where parents have explained their financial situation to their kids, and the kids are sometimes the ones to keep the parents in line and remind them not to buy something because it’s not in the budget or because they’re working toward something more important instead!
To save money on vacations, try staying at places airbnb.com and booking.com. And if you are flying, compare flight prices at websites like kayak.com and set up deal alerts at sites like airfarewatchdog.com.
We’ve been staying at places through Airbnb for the last couple of years, and it’s been great! It’s how we’ve done most of our vacationing during that time—even more than camping (which, as big outdoors people, we also really love). The Airbnb hosts have been wonderful, and so have the places that we’ve stayed! And the prices are awesome! We’ve stayed at fun places with a heated pool and hot tub for less than $40 per night, for example—which is less than the cheap (but too scary to stay in) hotels that were in the same city. (Unfortunately! I wish there had been decent hotels available for a comparable price.)
So if you haven’t tried Airbnb yet, give them a try! Sign up for an Airbnb account here and receive $40 to use toward your first stay. Pretty sweet!
And I just have to include a shameless plug for my angel mother, who has been renting out spare rooms in their beautiful southern Utah home (not an affiliate link :D) for the last couple of years. If you’re in the area to play at Lake Powell or hike in one of the beautiful national parks or other scenic areas nearby, look them up! Or if you’re planning to vacation near the Grand Canyon, check out these rooms they have there, as well.
Read this article to learn more ways to save money on entertainment.
Total savings = $600 per year
8. Reduce, or eliminate if you can, your car payment.
Another potential huge monthly savings that could really help you to fully fund a Roth IRA is if you could reduce or even get rid of completely your car payments.
Eventually, I do strongly recommend that you get rid of your car payment altogether. But in the meantime, if you’re able, reduce your car payment by $100 to $200 a month. One of the reasons that the average American has only $95,776 saved for retirement (scary!) is that they spend an average of over $400 on their monthly car payment. That means that, on average, Americans spend nearly $5,000 a year (enough to almost max out your Roth IRA just with that amount alone!) for something that continually goes down in value!
If you instead invest that $400 a month in good mutual funds for 30 years and earn an 11 percent average rate of return over that time, which is very doable, you would have $1,060,383—and if invested in a Roth IRA, that money would be tax free! Millionaire status just by driving paid-for cars! 🙂
But you will need a couple of hundred dollars a month to start making a car payment to yourself, so let’s stick with investing just $100 to $200 a month. of that money
Savings = $1,200 to $2,400 per year
9. Find cheaper rent or downsize your home.
And as a last idea for how to fund a Roth IRA, look at your housing expenses.
Consider finding a less expensive place to rent or even possibly selling and downsizing your home if the mortgage payment is too much for your income. You should not have a mortgage payment that is more than about 25% of your take-home pay, because if you do, it likely is preventing you from having adequate money to reach other really important financial goals. If your monthly mortgage payment is considerably more than 25% of your take-home pay, don’t panic, but do consider either finding a less expensive home to own in a reasonable amount of time or else increasing your income (which may be the better option, all the way around, and which you should be looking to do regularly throughout your career, anyway :)).
If you rent, you could pay a little more than 25% of your income in rent if you chose to because you won’t have the costs that come with home ownership such as maintenance and repairs.
But what we did when we were renting before we bought our first house was to rent a place for about as cheap as we could (and still feel safe and all of that, of course) so that we could save up money to buy our first house. (Then we were stupid and did basically no down payment, but we did at least have the money available to do repairs on the home, which was essential since we bought a foreclosure that needed some work.)
And I would recommend you consider renting a place as inexpensively as you can (while still feel reasonably safe and comfortable), too, to invest the difference or save it to purchase a home with a bigger down payment.
Let’s say you are renting a place while you save up a good down payment for your first home, and you are able to shop around and find a comparable apartment or home to rent that is $100 less per month than what you are paying now. That’s another $1,200 you can invest in your Roth IRA. Read this article to find lots of ideas for how to save money on your housing expenses.
Savings = $1,200 per year
By cutting expenses in the areas identified above, you really can find the money to fund a Roth IRA. And funding a Roth IRA is an excellent way to help ensure that you have a comfortable and enjoyable retirement.
Many people today really do have a great deal of disposable income. We just don’t manage our money very well. And much of the reason for that could be due to a lack of knowledge—and the fact that we just like shiny stuff.
But saving an adequate amount for your retirement is something you’ve simply got to do for the sake of your own well-being and that of your family (so that you won’t be a burden to them later in life). By saving adequately for your retirement, little by little you are buying your financial freedom. And isn’t your freedom worth it?
The Roth IRA is an excellent tool for investing for retirement. By investing consistently each month in your Roth IRA, you will be well on your way to building long-term wealth so that you can live in comfort throughout your retirement.
By saving as much money as you can to fund your Roth IRA (a good rule of thumb is 15 percent of your income) as soon as you can, you will have much more money (because of the awesome power of compound interest) available to travel, take care of your medical needs, spoil grandchildren, give to causes you care deeply about, and more.
Are you ready to get serious about saving for your future? You can find more helpful information about investing for retirement here.
Want to Track Your Financial Progress?
Check out the free app Personal Capital, which allows you to track how your investments as well as checking and savings accounts are doing and also view your account history to see how your accounts and overall portfolio have done over time. It’s a great tool! Sign up for your free Personal Capital account here.
Invitation to Share
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