What's The Best Money Tip You've Recieved? (funds, payment, taxes)
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I'm currently 24 and when I was 20 I was told by one of my uncles that if I continued to save money at the rate I was that I'd be a millionaire by the time I retire. This was enough to encourage me to continue to work hard and save my money. When I was 18 I had $13k and then 5 years later when I was 23 I reached 60k (this is largely due to being able to live at home until I was 23 which I am very thankful for). I'm using these 2 amounts because of the benchmarks of buying my first car at 18 and my first house at 23 so I remember exactly how much I had saved until those points.
What is the popular saying? If you save $100 a month from 18 to retirement and invest it correctly you'll have $1m?
Having $1m at retirement is not my ultimate goal in life by any means but this was the best advice I was ever given. It's what really got me planning for my future at a young age.
Live well below your means. It's like living below your means on steroids. When the average consumer gets smacked around by life, they think life is so unfair, which it is. But, for the few who have lived a frugal existence... kicked up a notch. Well, when life kicks them around, its like a blip, a speed bump, it's just a minor inconvenience.
Why did you stop contributing? You should never stop until you retire...
That could be debated. Now, I am 28 and have a long ways to go until I retire, so things could definitely change. But let's say that, on average, the market plays out like it has the past 6 years for me (both ups and downs).
By the time I'm within ~5 years or so of retirement (not IRS retirement age, but an early age I want to retire), my yearly contributions will be a drop in the bucket in terms of 401k growth compared to the snowballed growth of money put in from the beginning up until that point. Also, most likely, I will have more money than I would ever need to use socked away in my 401k, so in my last few years, stocking up on "bridge money" (or money that isn't tied up in an official retirement account) would be more enticing to me than continuing to tie it up in a 401k.
Instead, I'd be stuffing money away into low risk, after-tax vehicles to stretch me out as long as I could before I ever have to touch my Roth IRA principal. Then I could touch the Roth IRA principal. And only THEN I would I finally want to touch my 401k/Roth IRA.
Obviously, I would still ALWAYS contribute up to the employer match (I completely max now), but late in the game, I would probably back off to the point where I'm only contributing up to the employer match.
It wasn't something that someone said but it was something that someone did or didn't do. I saw something that changed my life forever. I was in college and my friend and I spent the night out of town at his uncle's house. He had an average home. I think it was around 2000 sq ft or so. He drove an old late 1970s model Chevy Nova.
The next day, we drove back home and my friend said, "Do you know that my uncle is very well off? Just by looking at him, his car, and house, you wouldn't think he is rich huh?" I was shock! I realized later that you don't need a fancy 4,000 sq ft home, three Mercedes, and fancy $5,000 suits to be well off..............
On the other hand, my Sister in Law. She spends thousands and thousands of dollars every year buying brand name clothes, shoes, jewelries, bought a brand new Lexus, shops at high end stores. Refuse to go anywhere that she considers a discount store....but she is dead broke. Living paycheck to paycheck.
That could be debated. Now, I am 28 and have a long ways to go until I retire, so things could definitely change. But let's say that, on average, the market plays out like it has the past 6 years for me (both ups and downs).
By the time I'm within ~5 years or so of retirement (not IRS retirement age, but an early age I want to retire), my yearly contributions will be a drop in the bucket in terms of 401k growth compared to the snowballed growth of money put in from the beginning up until that point. Also, most likely, I will have more money than I would ever need to use socked away in my 401k, so in my last few years, stocking up on "bridge money" (or money that isn't tied up in an official retirement account) would be more enticing to me than continuing to tie it up in a 401k.
Instead, I'd be stuffing money away into low risk, after-tax vehicles to stretch me out as long as I could before I ever have to touch my Roth IRA principal. Then I could touch the Roth IRA principal. And only THEN I would I finally want to touch my 401k/Roth IRA.
Obviously, I would still ALWAYS contribute up to the employer match (I completely max now), but late in the game, I would probably back off to the point where I'm only contributing up to the employer match.
I like your ideas. I think its a pretty good plan, so long as you continue to get the company match. I often wonder about that same scenario; get close to retire, but can't or dont want to touch the 401K $$.
An older co-worker, close to retirement, told me when I was 23 to up my contributions in my 401k to the maximum. He said I wouldn't miss the money since it's taken out pre-tax. I listened to him and 22 years later, am so glad I did! Now I have a large 401k account and I haven't contributed to it in 10 years!
This is a very good point. I could stop saving now and if I lost my job and just didn't touch the 401K money, I'd probably still be ok by retirement age in my mid 60s. I started saving pretty aggressively at age 26.
That could be debated. Now, I am 28 and have a long ways to go until I retire, so things could definitely change. But let's say that, on average, the market plays out like it has the past 6 years for me (both ups and downs).
By the time I'm within ~5 years or so of retirement (not IRS retirement age, but an early age I want to retire), my yearly contributions will be a drop in the bucket in terms of 401k growth compared to the snowballed growth of money put in from the beginning up until that point. Also, most likely, I will have more money than I would ever need to use socked away in my 401k, so in my last few years, stocking up on "bridge money" (or money that isn't tied up in an official retirement account) would be more enticing to me than continuing to tie it up in a 401k.
Instead, I'd be stuffing money away into low risk, after-tax vehicles to stretch me out as long as I could before I ever have to touch my Roth IRA principal. Then I could touch the Roth IRA principal. And only THEN I would I finally want to touch my 401k/Roth IRA.
Obviously, I would still ALWAYS contribute up to the employer match (I completely max now), but late in the game, I would probably back off to the point where I'm only contributing up to the employer match.
Yes, I've had similar thoughts regarding my situation if/when that time arrives.
I'm currently 24 and when I was 20 I was told by one of my uncles that if I continued to save money at the rate I was that I'd be a millionaire by the time I retire.
Keep in mind that the million dollars you'll have at retirement will be worth about 45 years worth of inflation less than what it is today. A million dollars went a long way 45 years ago. Of course, a nice house then cost $30K and a gallon of gas was 34 cents. A million doesn't go as far today when thrown at things tagged with 2013 prices.
Meanwhile, the best money tip I ever got was not to pay any attention to tips about money.
And just as a side note, cutting your 401-k contributions in the years prior to retirement exposes them to the highest tax rates you will ever be confronted with. This at a time when they are least important to you as additional disposable income. Doesn't make much sense. Put your FIFO glasses on and realize that the money you put in at 60-65 will be the money you can take out at 80-85. How broke or rich do you want to be at 80-85?
Last edited by oaktonite; 05-26-2013 at 08:38 AM..
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