Pay Yourself First!

When I started my first "real" job, my (dear) mother encouraged me to contribute as much as I could towards my 401(k). At the tender young age of 23, I was much more worried about MAKING it to retirement, much less about how I would fund it.

Well, dear mother was correct, and I am glad I listened to her wise words. Without a reform to the current social security policy and with the changing demographics (an increasing percentage of the population in retirement and a decreasing percentage of the population contributing to the pool), it has been estimated that social security funds will be exhausted by the year 2041. This means that if I retire at the ripe, old age of 65, it will be the year 2046, and I will not be receiving any social security benefits! This means that an increasing amount of my retirement will need to be paid for through SAVINGS! I've also done enough retirement planning to know that I will need quite a hefty sum saved up for retirement to support the lifestyle I'd like to have. This hardly takes into consideration what I should also have saved up for medical costs and unexpected expenses.

Anyways, my whole point for this post was to remind you to pay yourself first! It's easiest to have a certain amount of your paycheck simply put towards your 401(k) or IRA (or both!). That way you don't even see it and don't have the temptation to spend it. If you get a raise, try keeping your spending the same and increasing your retirement contribution.

Another note: If your employer matches your 401(k) contributions, contribute AT LEAST up to the amount they match. If you don't, you're giving up free money!!! This is absolutely the easiest money you could make with very little risk!