Shopping spree and Caribbean cruise! No. No. No. Pause and review your goals. This is a long race and you will want to rest from it at some point so keep your focus. The challenge is to always save money. Somehow it is so easy to spend more money as you make more money and therefore never have any extra for saving. How often do you think, where does all my money go?! I am making decent money but why do I feel just as broke as before?!
As your income increase, try to do these 3 things:
1. Increase your 401K contribution at work. Out of sight, out of mind. As your income increases, your taxes will also increase and you will be happy to have the tax benefit of the 401K. (A 401K is added to before being taxed so your taxable income is basically reduced.) A similar approach is to add monthly to 529 college accounts, IRAs or Roth IRAs. It just depends on your specific situation.
2. Find out how to pay off your mortgage by the time that you retire and adjust your monthly payments to get that mortgage paid off. Try hard to not have any debt – including a mortgage – in retirement.
3. Open up a non-retirement account, an individual or joint account, and set-up an automatic deposit each month of whatever extra you have left over from your income (after doing the first two things). Call this your “Freedom” bucket of money. Retirement accounts, like IRAs or 401Ks, have rules by the IRS. This account is outside of those rules. No one will tell you when you can or cannot use it. It won’t skyrocket your taxes by taking a chunk out in a given year. It will give you new options for early retirement. Freedom!
By Cammie Humke, Investment Adviser at The Humke Group, Inc Located at 555 S. Randall Rd in St. Charles, IL, phone 630-584-7343
The Humke Group, Inc is an independent firm offering securities through Summit Brokerage Services, Inc., Member FINRA/SIPC. Advisory Services offered through Summit Financial Group Inc., a Registered Investment Adviser. Opinions expressed are that of the author and are not endorsed by the named broker/dealer. All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy