This is the final part of a three-part series, Navigating the Financiapocoalypse. It’s intended as a get-started guide for people just starting down the path of actively managing their money.

Saving money in and of itself is representative of a longer view of life than someone who blows their whole paycheck every month. But saving for your retirement and other really, really long term goals is different from saving for your next car or vacation. Before we go any further in: I am not a certified financial planner, and I haven’t been doing this all that long — I can only tell you what I have found, and crunch some numbers as examples.

The sooner you start saving for your retirement, the better. Well, that’s obvious, you might say, but just how much better are we talking about? Let’s look at a couple scenarios.

Scenario 1: Dave

Dave graduates from college at 22 and immediately gets a good job with a starting salary of $50,000 a year. His employer offers a 401(k) plan with a 50% match up to 6% (meaning for every dollar he puts in, they’ll put in $0.50, up to 6% of his gross salary), but he doesn’t start in on it right away. Instead, he buys a new car, pays down some of his student debt, and generally just enjoys making and spending his money without worrying too much about saving it. A few years later, at 25, he decides it’s time to start saving for retirement. We’re going to assume he averages a salary increase of 4% per year, and has returns on the 401(k) portfolio of 10% per year (which is actually a little on the conservative side — this horrible year notwithstanding). So at 25 and making about $56,200, he starts putting 6% aside (which is matched 50% by his employer). Assuming all those things, he will have about $1.26 million in his retirement account when he’s 55.

Scenario 2: Will

Will also graduates from college and starts out at the same company in the same position as Dave, at $50,000 a year. Will, however, makes room in his monthly budget and starts saving 6% immediately, which amounts to around $250 a month at the outset. When he’s 55, he’ll have just shy of $1.55 million. In those three years Will was saving and Dave wasn’t, Will contributed about $9,300 — which made nearly a $300,000 difference in the end! If Will can be just a bit more disciplined from the very beginning and invest 7% (around $300/month), he’ll have $1.7 million — an extra fifty bucks a month at the beginning gets him another $150k by the time it’s all over.

Invest early, invest often

Getting started early clearly makes a big difference. You must force yourself to do it as soon as possible, especially if your employer offers a match — that’s like free money! I’m very lucky and my employer offers 100% match up to 6% of my salary — if Will’s employer did that, even with his original 6% contribution he would have more than $2 million by the time he was 55. With no employer match, it would only be about $1 million. How can you not take advantage of that? Like I said, free money.

If your employer doesn’t offer a 401(k) or other structured retirement plan, there’s still plenty you can do for yourself. Read about and setup an IRA or Roth IRA — those are tax-sheltered accounts that enable you save for retirement. The biggest difference is that a traditional IRA taxes the money when you withdraw it (in retirement, presumably), while a Roth IRA taxes it when you put it in. I’m partial to a Roth IRA because I’d rather pay the money now and get it done with while I’m (probably) in a lower tax bracket than I’ll be later in life, plus it gives me more certainty knowing exactly what funds I have in there — since Uncle Sam won’t take a bite out of them when I withdraw. That’s a pretty simplified view, but it’s how I remember the difference. You can read more about IRAs over at one of my favorite finance blogs, GetRichSlowly.

Stocks and mutual funds

Two words: Index funds. Billionaire Warren Buffet, one of the world’s richest men and a highly respected businessman, recommends only index funds for the average investor. Index funds represent market conditions as a whole and don’t tie you into a specific sector — protecting you from disastrous losses in the event a certain industry takes a big hit. Unless you’re going to turn into a professional money manager, these are really the way to go to ensure good long-term growth. On the whole, the stock market averages more than 10% growth per year, and index funds pretty much guarantee you’re going to get about that rate.

Buffet and other money managers I trust recommend against buying individual stocks yourself, because most people don’t know how to properly diversify — plus it takes a lot of attention to actively manage individual stocks. I sort of wish I had known about this a couple years ago — I opened an online brokerage account and invested in a couple companies. While I was up 20% earlier this year — far more than the 6% or so the whole market had been in the same time frame — the tanking in September and October hit that account hard, and I’m now down around 60%. It’s not a huge amount of money, I think of it as my “play” account or experimentation account, but it showed me how dangerous it is to not be properly diversified. I’ve accepted that I’ll need to not touch that account for a long time so it can grow back to where it was.

Crunch the numbers

Do yourself a favor: get familiar with the retirement benefits offered by your employer (if any) and head over to Bloomberg’s 401(k) calculator and run the numbers. Play with the contribution levels and watch that final number change. When you see what a big difference the small changes can make, it can help motivate you to start saving — or saving more than you are — as soon as possible. Don’t cheap out on this — you don’t want to have to spend your waning years working and worrying about money. Wouldn’t it be nicer to spend them traveling and spoiling your grandchildren? Of course! Contribute as much as you can, and fully take advantage of any additional benefits (like matching contributions) offered by your employer.

Learn more

There’s plenty of resources to learn about retirement planning online. Two of my favorite finance blogs, GetRichSlowly and FreeMoneyFinance, have loads of articles detailing some of the finer points of retirement strategy. But the basic strategy is simple: invest early, often, and keep increasing your contributions as you are able. You should think about how much you’re going to need to live every year when you retire, and use that to come to a total figure to aim for.

While this post was quick and broad and extremely simplified, I hope it helps some of you take a closer look at your retirement strategy. Too many young people don’t give this much thought until it’s too late — start as soon as you can, and as long as you hold a decent job and can make regular contributions there’s no reason you can’t retire a millionaire.