A couple of years ago, Emilie Hunt had to go to the emergency room with a stomach virus. The bill took a huge chunk of money out of her savings, more than $800, and kept her from saving for a couple of months.
"I'm really bad at planning for unexpected expenses," she said. "And instead of cutting other expenses, often the first money I cut is what would go into savings."
Hunt, an executive assistant at a private equity firm in New York City puts $150, about 2% of her salary, automatically into a retirement plan every month. Her biggest expenses are rent, student loans and food, in that order.
She makes a budget, but doesn't necessarily stick to it.
"I don't feel that I'm in trouble," she said. "But I feel like I'm not growing my savings at the rate I'd like to."
Many millennials like Hunt are saving for retirement, but not enough. They put away an average of 8% of their salary for retirement, according to investment firm T. Rowe Price's Retirement Saving & Spending Study, which looked at 1,505 millennials with 401(k)s.
That's a lot less than the minimum 15% that most experts recommend.
So what can millennials do to save more for retirement? Here are five tips.
Before you sign a lease or buy a car, think about cheaper options. Housing and transportation are the two biggest costs for most people and significant commitments of your future income, said Stuart Ritter, senior financial planning analyst at T. Rowe Price. A small change can give you a lot of financial freedom.
"There's a big difference between buying an expensive car, riding a bike or sharing a ride," said Ritter.
Make a Budget
Track your spending for at least a month. That is the first step for exercising restraint. Otherwise, your spending can sneak up on you. A $3 Starbucks coffee a day adds up.
Categorize your expenses as "needs" and "wants," and distinguish between the two, said Mark Kantrowitz, senior vice president & publisher at Edvisors.com, a site that provides financial advice for students and families.
"Cable TV is not a need, it's a luxury," he said.
If you think it's overwhelming to make a budget for all your expenses, pick a couple of categories and track them, said Ritter. Apps like Mint, a unit of Intuit, and LevelMoney help you track and analyze your spending habits.
Try increasing your savings for three months. Most people adjust to it, according to Ritter, who warns against having an "all-or-nothing mentality."
"Some people think they can never go out with their friends if they save more for retirement," Ritter said. "But maybe it means that you go out two times a week instead of three."
Be careful with how much you spend after college.
"When people start making a bigger salary, their lifestyle often inflates and suddenly they are living paycheck to paycheck," said Jason Vitug, founder and chief executive of Phroogal, a company that provides financial advice for millennials.
Phone bills, Netflix and magazine subscriptions are some of the expenses you can reduce, he said.
Save While Paying Off Loans
Student loan debt prevents some millennials from saving, according to T. Rowe Price's study. But it's important to prioritize both saving and paying off loans.
First, build an emergency fund of three to six months of salary. Then prioritize paying off your loans, said Kantrowitz. Start by paying off the loan with the highest interest rate.
Make it Automatic
While you are working, you should save a fifth of your salary so that you have money for the last fifth of your life, Kantrowitz advises.
Tell your employer how much you want to save and have the money automatically taken out of your paycheck. That will help you get used to having less money for spending.
Make sure you maximize your employer match, which can be upwards of 6 percent. "That's free money," said Kantrowitz.