Most people who are behind on retirement planning feel overwhelmed. They have no idea where to start. The “experts” throw around numbers like saving 15% of your income and saving $1,000,000 (now recently updated in places to numbers approaching $2,000,000) if you want to retire and not end up on the streets. This is especially true for those of us who are part of Generation X, the forgotten child sandwiched between the Baby Boomers and Millenials.

Thinking about saving $1,000,000 feels completely impossible for the average middle class person who is already behind on retirement savings and has a modest income. Instead, she needs to start by thinking small so she can begin to feel like she has some level of control over her daily life and her future retirement needs. I call this the 5% Rule for Retirement.

Make a 5% Change Starting Today

Most people can make small changes in their life if they take them one at a time and turn them into a habit. In this case, we’re aiming for changes that are only 5%, but have tremendous potential to add up over time if paired with other 5% changes.

Let me show you how these incremental changes have the potential to change the trajectory of your retirement plans.

If your electric bill is $85 a month and you reduce it by 5% by making some small changes to how you use lights, when you do laundry, etc. you can reduce it to $80.75 a month. You can save $4.25 a month. That doesn’t sound like much, does it? But let’s work out the numbers.

• $4.25/month = $51/year
• $51/year over 20 years = $1,020

You’ve just found a way to free up $1,020 toward your retirement fund by making a small change you won’t even notice.

If you can reduce your usage by 10% (which is reasonable for most motivated people), you can save even more over twenty years.

• $8.50/month  $102/year
• $102/year over 20 years – $2,040

Now, it’s not enough just to lower the cost. You also have to bank that money toward retirement. But I’ve shown you one small change you can make that will allow you to potentially add $1,000 to $2,000 to your retirement plans.

Other Potential Savings for Retirement

Let’s run the numbers in some other small ways that will barely be noticeable. These aren’t specifically 5%, but they fit with the idea of making small, incremental changes in as many areas as possible.

• $1.00/week on a 2 liter of pop = $52/year = $1,040 over 20 years
• $5.00/week on a drive through stop = $260/year = $5,200 over 20 years

Yes, that $5.00/week habit will cost you over $5,000 before you retire in 20 years. If you have a $10/week habit, it will cost you over $10,000 before you retire.

Here’s a tiny one that is actually a 50% reduction. I use Olay Daily Facial Cloths every evening. I realized that I could cut them in half and they worked just as well.

• 66 cloths = $10.50 = $0.16/each

So if I use one a day, these cost me approximately $58.00/year.

If I cut them in half, I get this.

• 132 cloths – $10.50 = $.08/each

So by cutting them in half, I now only spend $29.00/year. If I could funnel that toward my retirement, then I get this.

• $29/year for 20 years = $580

Now is $580 a lot of money over 20 years? No, it’s not huge. But why would you not do that little thing to help you incrementally along with all the other little changes?

Medication and Retirement Savings

Here is one that most people won’t think of, but can make a big difference if it is an option for you. Many people take medication daily that they could take every other day. Obviously I’m not a doctor so I can’t tell anyone what they should do about their medication. However, I have a medication I was taking daily that I realized I could use every other day and still get acceptable results (by experimenting with the knowledge and support of my doctor). This drastically reduced the yearly cost of this medicine by cutting this expense in half.

So for example, if you have a medicine that costs $100 a month and you switch to taking it every other day you will reduce your costs from $1,200/year to $600/year.

• $50/month saved on medication = $600/year = $12,000 over 20 years

By reducing the cost $600/year you will be saving $12,000 over 20 years. That’s a huge amount of money for a middle class person to potentially put toward retirement and it was achieved simply by changing the dosing schedule of a medication.

Now imagine if you could find a couple of other places to reduce costs by $50/month and funnel that toward retirement. Every $50/month cut you can find and discipline yourself to put consistently toward retirement will put $12,000 toward your retirement if you are going to retire in 20 years.

As you start to see these numbers, do you realize how much potential savings is slipping through your fingers every single day?

I’ve just demonstrated how someone could make small changes in life and add almost $20,000 to their retirement savings. I only picked a couple of small things. Most of us could go through our spending and, if we were honest, find many examples like this.

If you look at these numbers and say that you are so far behind on retirement savings that these numbers are too small to make any real difference, then you may very well be one of the hopeless.

The Hopeless Spend Money Now

One thing that researchers have found is that the poor and others of lower income who struggle with money tend to live for now. They don’t see life getting any better so they spend money in the moment so they at least have the pleasure of the moment.

For Gen Xers who are in the struggling middle class, this is a mindset that you cannot afford to have. If you are struggling to get by each month and living paycheck to paycheck, it’s easy to justify “treating yourself” to something small because you know you are never going to get to Hawaii or Europe or purchase a (insert big ticket item here). But at least you can enjoy a Big Mac or latte today.

But those are the choices that will make the difference in the long run for those of limited means. Not because any of those things are wrong in and of themselves, but because you simply don’t have the wiggle room to make those choices.

Should you always deny yourself of little fun things? No, because that becomes demoralizing. But you probably do need to consider if you should opt out of those little splurges more often than you do right now.

The more places in your life you can find ways to cut that don’t hurt (such as reducing your electric bill by 5%), then the more wiggle room you can find to enjoy a treat in the moment and make progress on your goals.

Start Today For the Sake of Your Future Needs

The first step is finding one place to reduce by 5%. Find a few small leaks and start by plugging them.

Is there something you purchase each week at the store out of habit (like pop) that you could reduce or eliminate? If you can find a few small things to change in your grocery shopping, you could be looking at potentially thousands of dollars to put toward your retirement.

That’s just from grocery shopping. Think through everything in your budget and how much leaks out every month. It happens to all of us in one way or another.

So the next time you feel anxiety or depression over your retirement plans, stop and think about the 5% rule. And then find something to change. Do’t allow yourself to give into the lie that it’s too late to start. Every bit you set aside now is something you don’t have to earn in the future when you are older.

If you want further inspiration in this area, I highly suggest The Complete Tightwad Gazette: Promoting Thrift as a Viable Alternative Lifestyle. It is dated in terms of the numbers since it was written many years ago (1998). But the principles and the mindset offered by Amy Dacyczyn are worth every penny (which is why the book is still in print all these years later).