Since you are reading this article, either you truly were hoping to find free money, or you are interested in saving more toward your retirement. We both know that people offering free money either printed it themselves, stole it, or really want something in return. So, let's concentrate on saving more toward retirement.
Most of us intend to save... we really do. The reality is that very few of us do it. You have probably heard the numbers, and they adjust periodically, but here are some of the basics. Americans as a whole basically save nothing. A few do, but so many more spend more than they earn, the national average shows NO savings. Something like 80% of Americans are one paycheck away from financial disaster. If any of this rings a bell in your life, don't take offense... recognize it is the way most Americans feels.
If you are on the edge, feeling like you are living paycheck-to-paycheck, you probably think I am nuts when I suggest setting aside $200 or $300 a month for retirement. So where do you get the money?
Budget!
This is not an alien word; governments operate with budgets all the time. Rarely, however, do people operate with budgets. Most of us get by with knowing what we have, how much we can spend, and how much debt we have. This is our downfall. For once, something that the government does regularly actually makes sense.
A budget is a written plan showing how much money is expected to come in, and how it will be spent. When you fail to budget, you are more likely to spend money on immediate desires rather than saving for future requirements. For example, imagine that your agency allowed unlimited overtime... work whenever, wherever you want, on any detail you want. Sound interesting? Think everyone in the agency would want that OT? What happens when everyone works 60 hours a week, raking in the OT, and the agency runs out of money 6 months into the year? How does it buy fuel? Or ammo? Or computer paper? Or light bulbs?
Our personal expenses work in a similar way. Since most cops are Type A personalities anyway, we can be rather impulsive. We get tempted into spending money in ways we don't originally plan if we don't have a budget. How many people do you know that have bought a hi-def flat panel TV because it was on sale or the company offered free installation or any other type of enticement? It's our nature! A written budget, though, gives us boundaries; it helps us stay focused and spend our money where we want to, not where the advertising gurus want us to.
By setting realistic budgets, you can actually set aside a fixed amount every month for retirement. You may not be able to start at $300 a month - that's OK. Start at $50 or $100 if that is all your budget allows. Then start working at finding the free money that is, whether you know it or not, in your budget.
Free Money?
Yes... you can actually save more without working any harder. They first trick is to recognize where you are spending on needs instead of wants. This may sound goofy, but give it some thought. Obviously, food, shelter and utilities are basic needs; so are transportation and clothing. After all, we do live in modern civilization and we can expect to enjoy some of the basic conveniences. These are items that we must pay for; these are mandatory in the budget.
Balance those against wants. We need food, but we want to go out for dinner because it is easier than cooking. We need entertainment (it's true), but we want to buy DVDs rather than rent them from the library. We need a telephone, but we want Caller ID and Voicemail and Auto Callback and Blocking. We need coffee, but we want to spend $4 on that Super Venti Tall Mocha-choco-latte with lowfat cream.
If you examine how you truly spend money, you will see that a lot of your money may be going to wants that are mistaken for needs. Get control of these and you will reduce expenses, which has the same effect (without the work) as increasing your income. Now, don't misunderstand me and eliminate everything. There is nothing wrong with going out to dinner with your significant other. You should do that. Plan it. Make it special. Set aside a fixed amount for dinner out. That might mean once a week, or once a month depending on your lifestyle and income. By planning your dining budget, you avoid the temptation to eat out rather than cook. Buying groceries and cooking at home will save you 50-75% vs. eating out. That's your money to keep if you budget right.
Credit is BAD
The second trick is to avoid using credit. Many professionals suggest cutting up ALL your credit cards; I like the idea, but in truthful disclosure, I admit that I have a card that I use for gas, planned purchases and travel. I have a load of points saved on it, so I hang on to it until I use those. Once I do, that card will be gone. The key here is that using a credit card (or buying on credit) causes you to spend more money.
There are a number of reasons why you spend more. First, you don't feel the pain of cash leaving your wallet. Charging $200 for a new cordless tool kit is easy. Shelling out 20 $10 bills makes it hit home what you are spending, and maybe then you'll get by with borrowing the neighbor's drill one more time. Second, the seller charges you more to charge. Depending on the company and the credit card, the store pays 3% to 6% each time you use your credit card. Ask for this money back by paying cash. I do this with big purchases all the time. Tell the sales person, "Hey, if I charge this, I know you pay 4% to the credit card company. I'll pay in cash if you give me a 3% discount. We can share that money rather than give it to the credit card company." It works about ½ the time for me. The worst they can tell you is, "no," so why not try for the discount?
Credit also entices us to buy things we aren't ready to buy - especially big items, such as furniture, TVs, appliances, etc. "90 days same as cash" and "12 months no payments" are common temptations. You can pay more here in two ways. First, remember that nothing is free. "90 days same as cash" means the store doesn't get its money for 3 months, even though it has to pay the supplier for the merchandise. They charge you interest for that, building it into the price. The "12 months" scheme is the same, although sometimes you have to open a store credit account. These can be dangerous because your minimum payment may not pay off the total due. When that happens, the store goes back and charges you 21% to 29% interest from the date of purchase. That little trick will be buried in the fine print somewhere and it is a huge way for the store to make money.
If you have the cash to make a big purchase, ask the store for a discount rather than extra time. On a $5,000 furniture purchase, you could save $200 or more, just for asking and paying in cash. That's free money. If you don't have the cash for a big purchase, wait until you do. Yes, the sale or special offer makes it enticing. Yes, the store may claim "lowest prices ever." The reality is there will be another sale in a few months at "never before seen pricing."
Conclusion
Saving for retirement requires budgeting. Most of us don't budget in our personal lives, but doing so can help us control our expenses. By reducing your discretionary spending, and getting discounts for paying cash, you can save hundreds of dollars a month. This can serve as your basis for budgeting retirement contributions. All of this can be done without working any additional hours at work, and with minimal pain.
That makes it, as I promised, "free money." Enjoy it - you earned it!
