How good are your parents with money?
If you’re here, I’m guessing… not so much.
You see, a lot of habits and beliefs around money come from when we were little. As a little %FIRSTNAME%, you didn’t know much about the world. So you looked at what your parents (or parental figures) did to learn how the world worked…
Especially around money.
- You might’ve heard them argue about tight money troubles.
- You would see how they reacted to the price in the checkout aisle at the store.
- They might’ve told you a lesson or two (Ex. “Always look/ask for a discount”).
Unfortunately for me, my parents didn’t manage their money well.
It got so bad at one point that I remember them talking about losing the house!
That’s what drove me to get my s**t together and make sure I don’t have to go through that again (or my future bahbies).
!!!
But how can you go through life without dying on the Walmart floor like we almost did?
Here’s the one simple, not-so-well-known trick to make sure you won’t work your life away for taquitos:
Retirement savings.
“Eww, retirement. Why would I worry about that? That’s like when I’ll be 65 and old and wrinkly. I’ll have something saved up at that point anyway.”
I know saving up for retirement doesn’t sound sexy and new.
It’s actually the opposite.
But it’s super f**king important to not be a dumba** and put money away, no matter how old you are.
In your early 20s? This is the best time to take advantage of compounding growth with your money.
In your late 30s? You should have at least 2-3 times your salary saved up for retirement.
In your 40s? You better start moving your butt.
“Alright Caleb, how does this retirement savings thing work?”
It’s pretty simple:
- Start contributing to your 401k and hit your employer match.
A 401k is where you put money into a retirement plan sponsored by your employer, where the money is expected to grow with a tax advantage over time.
Most employers will match their employee 401k contributions to a certain percentage of your paycheck (usually 4-6%).
That means if you contribute 4-6% of your paycheck to your 401k, your employer will match that contribution…
Leaving you with a total of 8-12% of your income saved away for your retirement.
Winner, winner chicken dinner.
Just doing this at a young age can set you up for retirement without dying on the Walmart floor.
But if you want to ball out at the country clubs when you’re retired…
- Max out your Roth/Traditional IRA contributions.
After going through your employer, you can contribute to your retirement savings with a Roth or Traditional IRA.
These are individual retirement accounts that you open and manage with your bank rather than your employer.
Here’s how much you can contribute per year by age:
- Under 50 years old: $7,000 per year
- Over 50 years old: $8,000 per year
Although you’ll have to manage these more than your 401k, these are AWESOME for putting away extra monies when you’re old and cranky.
- Max out your HSA contributions
So, you REALLY want to ball out when you’re old, huh?
I’m impressed.
After you’ve contributed to your retirement savings, you’ll want to max out your HSA contributions.
An HSA (health savings account) is a tax-advantaged medical savings account.
Pretty much, you can put your money away in this account for medical/health bills without paying taxes on it.
For example:
Let’s say you make $60,000 per year and pay 20% of your income for taxes.
$60,000 x 20% = $12,000
If you contribute $4,000 each year to your HSA, you’ll only be taxed for $56,000 of your total income.
$56,000 x 20% = $11,400
$12,000 – $11,400 = $600 saved per year
Now, let’s say you did this for 5 years straight and you have to pay an unexpected medical bill.
$600 x 5 = $3,000
You’d save $3,000 from just using the money from your HSA vs. putting the money away in a savings account.
At the end of all this, make sure you have at least 20% of your income saved for retirement. If so, you’re doing it right.
Ez monies.
And there you go.
You’re set for retirement.
Now, stop buying f**king taquitos and start putting your money away, kumquat.
(Yes, I really just said kumquat.)
Taquitos,
Caleb Hammer
P.S.
I know I “lecture” you a lot in these emails…
And although I give you some juicy advice you don’t get from the channel, it can be pretty hard putting everything into action.
That’s why I wanted to remind you about my fabulous Budgeting Class.
Interested?
⇒ Join me and thousands of other students inside my Budgeting Class
