One Shrewd Baby Step for a Wealthy Future

putting money in bank. One shrewd baby step

Nowadays, more than ever, it is extremely important to ensure that you will have wealth when you retire. The world is in very uncertain flux and no one knows what the future will bring. Depending on who you choose to believe, Social Security might or might not be there.

You might or might not be able to retire at 65. See what l mean about uncertainties? What l do know for certain is that you need to take action and take care of number one. You! You know why? Because nobody cares enough about you. You have to help yourself. This one shrewd and painless baby step can make a world of difference to your financial future.

one shrewd baby step 401k
Contribute as much as you can to your 401k plan, and watch it multiply over the years.

Shrewd Baby Step for a Better, Rosier Future:

Contribute to your company 401k fund:

Your first move as I’d written about previously is to get a clear financial picture. This alone will point out areas where you can save money and allocate somewhere else that will reap benefits later.

What is the 401k plan?

Update for 2021:

The maximum contribution for the 401K contribution has increased to $19,500. If you are over 50 years of age, you can contribute a catch-up amount of $6500. The maximum amount of contributions from you and your employer can not exceed $58,000.

With the demise of the pensions that our parents had, most companies shifted the responsibility of saving for retirement to the employees. 401k is a tax-qualified, defined-contribution pension account as defined by section 401k of the IRS code. It basically means “you’re screwed later if you don’t prepare now” :-). The maximum you can contribute to your 401k plan for 2017 was $18,000.

Let’s break this down a bit further:

$18000 divided by 52 is $346.15 per paycheck. This is a lot of money for people to part with, especially when living paycheck to paycheck. Let’s look at a 30-year-old person with a salary of $30,000 per year and who contributes 10% of their paycheck which breaks down to $57.69 pretax.

Plug these figures into a 401k calculator and you will see that your contribution over 30 years will be $181,000 by age 65, but your payout will be $1.27 million!!!!! A mind-numbing difference of over ONE MILLION DOLLARS!

Think about all the frivolous things you spend money on. Think really hard. Can you honestly say you can’t find $57.69 dollars weekly? (if your company matches, it’s even less than that!). The prospect of having an extra $1864 monthly at age 65 in addition to your Social Security check should spur you into action.

What if you work for yourself and have no access to 401k?

For those without access to 401k plans, there is the option of the Roth IRA. The Roth IRA allows you to contribute a total of $5500 per year to your retirement plan if under 50. Over 50, the maximum is $6500. You can find more information on the limits here at the Roth IRA website.

This breaks down to $105.77 per week, another doable figure to ensure a better financial future. There is no minimum either, so you could do less. You can open a Roth IRA account at any of the traditional bank or stock trade companies like TDAmeritrade or Scott of Fidelity. Using a Roth calculator, your payout with this scenario at a contribution of $5,000 per year will net approximately $590,000.

Seeing how little it takes to get into the game, you can understand why people find it hard to empathize with people who insist on wasting their money on really frivolous things instead of using it to ensure a better future. As you shop for those holiday gifts that will be forgotten as soon as the 26th rolls around, think of the money that could be put to better use.

You might also like :

Teaching kids about $$

Questions to ask yourself:

Can you put it towards your new Roth IRA? Can you contribute it to your 401k? There is something to be said for delayed gratification. Nothing thrills me more than checking out my 401k statement at the end of the year and seeing how it continues to grow.

I stopped working and took early retirement. I have not contributed one cent since 2013, yet l make more money yearly, more than l was making when l worked full time, thanks to dividends and compound effect. This is what l like to call the Steam Roller effect!  Go figure 🙂 🙂 :-).

I think it’s safe to assume that this is how a lot of people have grown their wealth over the years, but prefer not to share, especially with the less fortunate. It takes you actually digging and trying to figure out your own path to see it laid out before you, and once you discover it, you want to acquire financial independence, and sooner than the traditional age of retirement.

No one. I repeat. No one is going to promise you a rosy future. Truth be told, a lot of people do not wish you good fortune. There is too much jealousy, envy, and apathy for people to worry about anyone but themselves.

Make a list:

One of the best ways to make sure you stick to the right path of wealth accumulation is to surround yourself with people who have the same ambitions as you. You can do this by following and maybe subscribing to magazines such as Forbes online where you get constant glimpses of other ways to save.

Another option is by following trusted financial writers (but make sure to vet them first, you don’t want to take advice from people who are themselves drowning.) Remember that all that is shiny is not gold when it comes to the “experts” online. It’s easy for anyone to set up an online persona and prey on the weak. This is a sure way to ruin if you don’t do your due diligence.

If you want a better future for yourself, you need to take all the steps necessary to assure that. Notice l said NEED to! Don’t think you’re too young and have plenty of time. You’ll be surprised at how quickly time passes. Make this one shrewd baby step for a wealthy future. You won’t regret it.

1 shrewd baby step for a wealthy futute

Save

Save

28 thoughts on “One Shrewd Baby Step for a Wealthy Future”

  1. I have 401k and TSP (government equivalent) I hope they are still around when it is time for me to retire. I pay into them big time and I do rely on using them for retirement in another 25 years.

    Reply
    • Not sure about the TSP, but l’m sure your 401 will be waiting for you in a grand tidy sum in 25 years in one form or the other. Good for you to handling business Mimi! 🙂

      Reply
  2. My mom (age 62) retired from her federal government job in 2010, I believe. She had a TSP like Mimi has. She is now enjoying her retired life! She worked hard years before retirement to even pay off her debt! Now that’s the life! She doesn’t work anymore and enjoys traveling to visit my sister (who lives in Maryland) and myself (I live in Michigan). I hope that my husband and I can have a nice retirement like my mom! My husband opened a 401K last year. I agree with you, if we think about the frivolous things we spend money on, we could use that money to put into our 401K! Just you writing that inspires me to increase the amount we are putting into the 401K! Great tips!

    Reply
    • Good for your mom! It’s amazing what a little planning can do to make ones world better in the future. People scoff and say a Starbucks Latte or Smoothie is not going to make a difference, when really..yeah..it definitely can make a difference. It really adds up and we can find the money if we try. I am so glad you’re increasing your 401k contribution. You hardly miss it from the check. Your mom has set a great example for you guys. I’m pretty sure you guys will be fine by retirement time. It doesn’t seem like much in the beginning, but once it picks up steam, there is no stopping it 🙂 . Good luck. I am so proud of you guys.

      Reply
  3. Great post, KemKem! I’m depending on retirement from education plus my supplemental retirement plan to complement Social Security if it’s still around in 15 years when I retire. It’s so important to plan for the future. If you have kids, teach them how to be financially literate now. Thanks for sharing. 😉

    Reply
    • Thanks Michelle. I love what you say about teaching the kids. It really is important. All they get from TV is fluff and consumerism. They need to learn hard facts. You want something, you need to work for it 🙂 . Not what they want to hear..but the heck with that..haha! I think SS will still be around :-).

      Reply
  4. Financial health is so important. I just began my first big girl job post school and it hurts to see large sums of money pulled out each check. I can easily make plans for that money! LOL. but I remember the big picture. It will be worth it. Thanks for this important post.

    Reply
    • Oh Bree, you brought back memories of when l started working and saw the SS, FICA deductions etc.. Mind blowing and so depressing. Yep! Just focus on the big picture. It will be worth it in the end.

      Reply
  5. Thanks for the break down, it seems undoable but if you look at the bigger picture, you habe to be prepared, especially since our economy is stable one day and in given moment it can change. I loved that my last job had a matching program.

    Reply
    • You’re right, it seems daunting at first and a bit of money, but really when you break it down, it is doable. The economy is very unstable and the worst part is l don’t think the “experts” have a clue either. The only thing we can do is be vigilant about our own finances. The matching program is awesome isn’t it? Makes that journey so much faster and sweeter.

      Reply
  6. I’ve learned a lot from my mom who had one, and retired after 37 years. She also has a great pension plan. My husband who is in Financial Services advises me on my 401K/403B’s.

    This is great advice.

    Reply
    • Good that you’re learning from the master 🙂 . It sucks that a lot of companies got rid of pension plans, but l’m so glad your mom has one. How lucky to have your very own personal adviser. You can’t beat that!

      Reply
    • Good for you. The good news is that you don’t even have to do anything else like move it after you leave the company. You can just let it get fat right there. I did the same thing to save adviser fees. Left it there as l worked for a big corporation. 🙂

      Reply
  7. Financial health is so important. I have a 401k, but I could have so much more if I put my mind to it! It’s one of my financial goals for the new year!

    Reply
    • Yes, it certainly is. You have a great base already with the 401k, but perhaps you could do it painlessly..like 1% increase ever 3 months or something so it’s painless :-). I remember doing that at some point till l got to the maximum contribution. I’ve also done it the other way, contribute a huge chunk so l meet the maximum during the year, then you have more money on the check towards the end of the year. No wrong way really :-).

      Reply
  8. Thanks for the wake up call of this financially timely post. I am a freelancer and my blog is my fulltime as well so no 401k option but thanks for introducing me to the Roth IRA option. I definitely want to be more financially responsible so I will be looking into this.

    Reply
    • Glad to hear it. The Roth IRA is perfect for you. There is no minimum and l think you can make up to $117,000 and still contribute to it. You can set it up online with just about any bank and if you invest it in mutual funds (I like Vanguard which is what we have my husband’s in), you can basically set it and forget it :-), the dividends being set to be reinvested automatically.

      Reply
  9. We all have to start planning for our futures right now. We have a 403b plan at my job and I’m not even sure what my husband’s job offers but I’m meeting with a financial advisor still to make sure we are on the right track.

    Reply
    • Yes Jonna, we certainly do! Sometimes it amazes me when people still think someone is going to sort it out for them. Good for you for meeting with an advisor. It will set you on the right path for sure 🙂 .

      Reply

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.