I hear about people who have 401K plans to save for retirement, and then borrow against their account. This makes no sense at all.
We must learn to live on a fraction of our take home pay. In the book “The Richest Man in Babylon,” a personal finance classic, it says “a part of what you earn is yours to keep.” “A part of what I earn”? Don’t I keep all I earn, you ask?
Well, no. First you pay taxes. Then you pay all the bills you precommitted to – mortgage, credit cards, utilities, insurance, etc. Then you pay the grocer, the retail stores, the pizza place, and Starbucks. Pretty soon you have spent all you made and have nothing left. So, none of what you made is yours to keep.
No matter how much we make, we must learn to live on less, so we can save some money. Some people who make lots of money are broke because they spent it all as fast or faster than they made it.
Is that you?
Good Morning,
Focus
I make $40k per year,
How much should I set aside in retirement and if I don’t have a 401k, what should I put it in?
Ted would be most proud of you Larry. Your Grandfather was one of the most penurious (thrifty) men I have ever known. He instilled in all his children a strong work ethic, and always talked about “saving for a rainy day”. OK- maybe he was a little too stringent about turning the lights off when you were not in the room, but we certainly learned that “money doesn’t grow on trees”- an often heard expression in our house.
Timely reminder during the approaching holiday season. I found a free audio version of the suggested book “The Richest Man in Babylon” on youtube. Looking forward to the drive home so I can begin listening.
Mr. Micawber: “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Pay yourself first into an account. Usually 10 percent of your net income. I do auto deposit into my saving account. It is fun to watch is grow. IT IS NOT WHAT YOU MAKE, BUT WHAT YOU KEEP. There will always be distractions from this; DON’T LOOSE FOCUS FROM PAYING YOURSELF FIRST. I teach Financial Fitness at our local college and it truly is a passion of mine to help one household at a time get a handle on their finances.