Scraping together extra funds to contribute to an individual retirement account or 401(k) plan can be tough. Many savings methods focus on expenses that vary from month to month, like dining out and buying groceries. But these types of savings take effort every single month.
Let’s say your goal is to trim your grocery budget by $150 a month so you can save more for retirement. This requires you to pay attention to your grocery spending every time you shop. It might require clipping coupons or putting more effort into meal planning. None of this is a bad thing, and saving on your groceries may be a worthwhile goal, especially if you frequently over-spend in this area.
[See: 10 Costs You Can Eliminate in Retirement.]
However, saving for retirement doesn’t have to be this difficult. The ” one-and-done” method of savings requires you to put effort into saving just one time, and then you can rack up savings automatically for months to come. Here’s how it works:
1. Write down all of your monthly bills and the amount you pay for each expense. If you’re paying interest on that particular bill, include that amount in the cost.
2. Figure out which of these monthly expenses you can cut altogether, and put them on the chopping block.
3. For the expenses you keep, try to trim the monthly bill as much as possible.
4. Dedicate those savings to your retirement account.
The one-and-done method takes some effort up front. Just compiling your bills will take time, and then calling your lenders or utility companies to reduce your spending will take more time. But once you’ve trimmed these expenses, you can roll the amount you save into a retirement account month after month.
Here are some expenses you might be able to reduce with this method:
Rent or mortgage. You could save significantly on your rent by downsizing or possibly moving to a more affordable location in your town. You may be able to save on your mortgage by refinancing to a lower rate, which could significantly reduce your monthly payment.
[See: 10 Ways to Reduce Your Housing Costs in Retirement.]
Car loan. Your best bet is to get rid of your car debt. If that’s not possible, consider downgrading your vehicle to something more affordable and with a smaller loan payment. Also, look into refinancing your auto loan to a lower rate with a lower monthly payment.
School loans. Federal student loans offer a wide variety of repayment plans. You may want to pay off the loan more quickly or look for a way to reduce your payments. Compare the repayment options to see if you are eligible for a more manageable repayment schedule.
Credit card debt. Aim to eliminate all credit card debt. In fact, you might want to pay off your high-interest debt before you increase your retirement savings. But in the meantime, you can transfer some or all of your credit card debt to cards with a 0 percent introductory APR, which can save you serious cash in monthly payments, at least for a few months. But remember to pay off the debt before a higher interest rate kicks in.
Utilities. Chances are that you can’t get rid of your utility bills altogether, but basic home maintenance and wise management can help lower these bills every month. See if your local utility providers offer a home efficiency audit, which could show you a few areas where you can spend a little money on things like insulation or efficient light bulbs in order to save on utilities month after month.
[See: 25 Ways to Enjoy Retirement on a Reduced Income.]
Internet, phone and cell phone services. In some cases, you may be able to cut these expenses altogether. For instance, do you really need a home phone? If not, eliminate this bill, and put the money you save toward your retirement investments. And be sure you check for a cheaper cell phone plan every time your service contract is up.
Cable. You might be surprised to learn than you don’t really need cable TV anymore. A couple of inexpensive subscription services such as Hulu could provide enough entertainment to cut cable altogether.
Subscription services. it’s easy to overdo it on subscription services such as Hulu, Sling, Netflix and more. Check out your current services, and cut your list down to only those you’re using on a regular basis.
Insurance. Car insurance, health insurance and homeowners insurance are just a few areas where you might save with a little effort. If you’re a good customer, your insurance provider might let you negotiate your monthly premiums for some serious savings. It’s worth an ask.
The key to making this method of savings work is keeping track of exactly how much you save. If you cut $200 from your bills every month, remember to increase your retirement account contributions by that amount. Otherwise, you run the risk of frittering the cash away on unnecessary expenses instead of increasing your retirement savings.
More from U.S. News
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How to Use the One-and-Done Method for Retirement Savings originally appeared on usnews.com
