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By Grant Webster, CFP®, MSBA
When was the last time you found $5,500 laying on the sidewalk? Under your bed? Randomly added to
your bank account?
What if I told you it is relatively simple to “find” enough money ($5,500 to be exact) in your current
budget to fully-fund one of the most important retirement savings plans available to you—the Roth
I will show you just how simple it is to find money to stash away for your retirement by simply being
smarter and more creative with your finances. I chose to use the Roth IRA as an example as it is my
favorite tool to efficiently sock money away for retirement. I'll show you real examples that I have
used and the money I have potentially saved in each example. In the end, hopefully we will have
enough to deposit $5,500 into our Roth IRAs—which by the way, is currently the maximum allowable
amount you can contribute to your Roth IRA on an annual basis (additional $1,000 if you are over 50
years old).
Let's get started.
Get a better deal on your cable package
Cable companies are notorious for overselling new customers and locking them into contracts that will
cost you big bucks to get out of. When I first moved into my condo, I too was sucked into a package
that was much more than I needed—about $180 p/month to be exact. Several months later, I realized I
was spending about $6 a day to watch about half an hour of TV a day. I remembered reading an article
about negotiating with your cable company so I decided to call my cable company and give it a try.
I called up my cable company on a Friday afternoon (as recommended) and told the representative
that I wanted to cancel (cable companies have a good amount of competition these days and
customer retention is important). I was quickly transferred to a “retention specialist.” “Ok, Mr.
Webster, we understand that you would like to cancel your services, but let me see if I can get the
price down for you, sir.” He starts out by offering to lower my bill to $150 p/month. I tell him that is still
too expensive and I would like to cancel. I hear keyboard clicking in the background as if he's magically
lowering my rate. “Ok, Mr. Webster, I was able to get you down to $130 and I was able to give you
some premium channels for 3 months. How does that sound?” I told him I would still like to cancel and
that I'm happy using Netflix and Hulu for much, much less money. He (most likely) looked at his
response sheet and said, “What about sports? Do you like the Chargers? How will you watch them play
without cable?” I reply that I would like to cancel, without an ounce of friendliness (even though the
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thought of not watching the Chargers made me cringe). He then tells me that he talked to his
manager and he could lock me in at $120 for the same package and that I just need to lock in that price
with a 12 month contract. I tell him that I need to be under $100 with no contract. He tells me he can't
do that and I tell him I would like to cancel right away. He sounds irritated and asks to talk to his
manager again. “Ok, Mr. Webster, we can get you to $100 p/month with a one year contract. How
does that sound? “No, I will not do a contract,” I reply. One more time and they agree to $100
p/month, good for 12 months with no contract.
Annual savings to fund Roth IRA: $960 ($4,540 more to go).
Stop going out for lunch and earn a professional designation
in the process
I calculated how much I was spending to eat lunch out everyday at work. The number was astonishing.
On average I was spending roughly $8 p/day for lunch. Usually this was just a sandwich, chips, and
soda. That comes out to about $40 p/work week and $2,080 p/year.
I started bringing a lunch to work, and at the same began studying for a new designation during my
lunch hour. The benefits were two-fold. Studying at lunch essentially forced me to bring my lunch
(takes too long to go out to pickup food), and also saved me money in the process. At the same time, I
was getting an extra 5 hours a week of studying in, which freed up some much needed downtime after
Obviously, with working professionals, it will be difficult to accomplish this everyday, but just
beginning to think about making smart changes will have an exponential effect on your overall
Annual savings to fund Roth IRA: $2,080 ($2,460 to go).
Refinance your high interest auto loan
You may have heard that interest rates have hit historic lows within the last year or so. Many
homeowners have taken advantage of low interest rates to refinance their mortgages, but few have
taken advantage of low rates to refinance their high interest rate auto loan. I recently refinanced my
auto loan interest rate to 1.98% at a Credit Union (they typically have lower rates). This saved me
nearly $65 each month on my car payment. Obviously, debt is a Financial Planner's nemesis—but if
you do have outstanding debt, ensure that you are paying the least amount of monthly interest as
Annual savings to fund Roth IRA: $780 ($1,680 to go).
Establish a monthly bank transfer into your Roth IRA
One great thing about technology is that you can completely automate your monthly savings. Instead
of having to make payments manually, you can have your deposits automatically made based on your
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preferences. By having automatic deposits made, you are effortlessly saving for your retirement. Start
with an amount that you are comfortably with and then increase this amount when you get raises or
your income rises. By contributing to your Roth IRA on a monthly basis, you are also dollar cost
averaging. This means that you are buying more shares of your investments when the price is lower,
and less shares when the price is higher. A good amount to start with may be around $100 p/month.
Annual savings to fund Roth IRA: $1,200 ($480 to go).
Ditch the high priced gym membership
Luckily, the building I live in has a free gym for its residents. I can’t imagine paying for an expensive
gym membership ever again. According to www.statisticbrain.com, the average cost of a gym
membership is $55 per month, and the average amount of this monthly fee that goes to waste from
“under utilization” is just under $40. In addition to the high monthly fees, gyms often have high
cancellation fees and hidden costs. It's probably best to shop around for the best deals or ditch the
membership altogether if you are not using it enough.
Annual savings to fund Roth IRA: $660. Roth IRA contribution is now maxed for the year!
There you have it—just over $5,500 of savings simply by being creative, frugal, and smart with your
budget and expenses. Once you have committed to changing your spending habits, you will put
yourself on the path to be a smarter investor as well. Next step—how will you invest that growing Roth
IRA balance?
Grant Webster, CFP®, MSBA is a financial planner for AKT Wealth Advisors LP in San Diego, CA. He can
be reached at [email protected]
Please consult with your tax professional or financial advisor to discuss whether or not investing in a Roth
IRA may be appropriate for you.
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carlsbad, ca
escondido, ca
portland, or
akt wealth advisors lp
salem, or
san diego, ca