Telling someone to save 15% for retirement (of your pre-tax income) might just be simultaneously the easiest and hardest step in the journey to financial independence. It is incredibly easy to explain and understand this step since everyone can immediately understand why this would be important. Saving more, earlier, is a key to any path to becoming financially independent and retiring so that shouldn’t be a surprise.
Even the how part is relatively simple in that you could just log into your 401k right now and set your contribution percent to 15%. As to whether or not you could actually afford to do that is a different story but everyone knows the actual mechanics of the step is the point.
Speeding is a huge waste of time and money. Reckless driving in general is decidedly bad for people on the path to financial independence. Not only does it save very little time (if any), but it can be very expensive to you in the long run. We are all here to save money not waste it, right? Call me old but I’ve gladly shifted myself to the center lane on cruise control. Feel free to comment in support or to tell me how wrong I am.
Two questions. First, are you contributing to an IRA account for retirement? Second, are you doing the max IRA contributions allowable amount each year? (assuming you are eligible to do either) If you can answer yes to these questions feel free to move onto the next step in the Path to Financial Independence. If not you need to keep reading on why they can be so important for your future.
When you get deep enough into the financial independence community, you are going to want to start building your own spreadsheets. Don’t get me wrong, the spreadsheets available out there for free are great. But sometimes you want something quick or the pre-built ones are just missing something you need. I have three essential personal finance formulas and how to use them.
Not everything in the personal finance world is pure optimization of assets through the use of beautiful spreadsheets. Don’t get me wrong, there are a lot of spreadsheets, and they are all beautiful, but sometimes decisions are emotional. Making some financial decisions for emotional reasons despite the math needs to be normalized. We like the quick “wins” of closing those smaller loan accounts early with the debt snowball method. It keeps us motivated to continue.
I’m not going to break any ground here telling you that high interest consumer debt isn’t good for your financial welfare. We all know that the first step toward a life of financial independence is to pay down high interest debt. Knowing the destination isn’t the same as knowing the directions for getting there however. There are several, very popular, methods for paying down debt at an accelerate pace we’ll look at later in the article so stay tuned.
Sure. “I was able to save $15,000 more in 15 minutes for retirement and you can, too.” Ugh, I know… I know. We all hate it when personal finance writers assume that just because they were able to do something then it should be easy for everyone else, too. That said, what I did was incredibly generic and could apply to a lot of people out there with a company-sponsored 401k.
Employer 401k Match: Step 7 on the Path to Financial Independence
Does your employer offer a 401k match with contribution program and do you contribute enough to get the full match? I hope if you are reading this you understand the importance of saving for retirement so I’ll skip that. What is more important here is saving for retirement with someone else’s money. The 401k match is essentially your employer giving you free money for retirement as long as you save too.
Personal finance is like sex and religion: nearly everyone has something to say but will generally avoid discussing it. Our society has made discussing your finances with anyone else taboo. We’ve spent years associating our self-worth with our net-worth to the point that people feel like personal finance is a competition. You try ‘Keeping up with the Jones’ because deep down you don’t want to get too far behind in the race you perceive to be life. That race can be lonely because personal finance is lonely.
I’ll agree that to pay bills on time isn’t the most revolutionary financial advice but it is very important. It is important beyond the obvious ‘stay out of debt and collections’ aspect of paying your bills. There are far-reaching effects of paying your bills late you will want to avoid where possible. I fully understand that sometimes people pay their bills late because they lack the funds to pay in full on time. This advice isn’t necessarily for that situation but rather for those forgetful among us who have trouble remembering to pay on time.