Budgets are sexy blogger J.Money started a My millionaire to-do list.
He directed us to check out his “millionaire to-do list”
- Max out my 401(k)
- Max out my Roth IRA.
- Save/invest 1/2 of all future bonuses.
- Sell unwanted stuff on eBay/Craigslist.
- To be frugal, but not insanely frugal ;)
I don't know about you, but I feel like his to-do list was pulled right out of my head. Of course we might not all have certain options open to us right now, but I don't think just because you find yourself in the position of not having access to certain things that it shouldn't be on your list.
Which brings me to his next direction which is to review your list every once in a while to remind yourself WHY your saving so much. One thing he didn't say, but that I think goes along with the reviewing of your list is to update your progress.
On the list that he wrote out he wrote next to each pledge that he wanted to do every year what doing that would mean and look like.
Maxing out his 401(k) would mean for him a total of $16,500 invested + $16,500 matched!
He happens to be lucky enough to have a company that matches his contributions. Usually or at least from what I have come across most company's match up to a certain percentage most times it's around 4%.
So what does that mean for you, it means that depending on your budget there two different options that you have to get the most out of your money.
Your first option is if your company matches contributions and you can afford it max it out, by contributing $16,500 over the year, that is the amount the plan lets you sock away pretax every year. So I think to figure this out you would divide $16,500 into what you make over the year before taxes and change the answer from a decimal to a percentage which is what you should have taken out of your check for your 401(k).
Your second option is really two options for if your company matches a certain percentage.
If your company matches say 4%:
Option 2A: Arrange to have 4% of each check put into your 401(k).
It is really a no brainer or it should be that if your company matches up to a certain percentage that you should at least contribute that percentage to your 401(k) because other wise that is really money down the drain that you could have had in your 401(k). You want to take full advantage of what your company is willing to contribute.
I would recommend that you do the calculations to see how much you will save by contributing the same percentage as the company as your minimum. This is where the second part of your second option comes in.
Option2B: If after your calculations you find that by as a minimum contributing the same percentage the company does that your total contribution for the year totals less then the max aloud for the year ($16,500) change the percentage your contributing. Even if your company only matches 4% (yeah free money!) that doesn't mean you shouldn't contribute more then that percentage. This is only if you can afford to contribute more then the minimum percentage that is matched. If you can afford it figure out how much the difference of the 4% your already going to contribute grand total is from the max aloud contribution per year $16,500. Say it is $1,200 short of the max aloud, take that amount and the previous grand total you had and divide it from your total income over the year to get the new percentage you should contribute to max out your 401(k)
There you go which ever option you chose you just arranged to have your 401(k) maxed out.The money grows tax-deferred -- a terrific deal. And because your contributions are automatically withdrawn from your paycheck, 401(k) plans make saving easy.
Maxing out his Roth IRA would mean him having $5,000 invested –> stocks, funds
Note $5,000 is the max you can contribute to your Roth IRA every year which is with your after-tax money.
So when you make your list write next to each pledge what that would mean for you at the end of the year. This way you can add all your pledge $ up and use a tool such as the Millionaire Calculator J.Money used from the CNN.Money website.
Then review it every once in a while to remind yourself WHY you’re saving so much.
My millionaire to-do list:
- Max out my 401(k): I don't have one currently, because I am unemployed. But it's on my list for when I get one.
- Max out my Roth IRA: I don't have one currently, because I am unemployed. But it's on my list for when I get one.
- Save/invest 1/2 of all future bonuses: Not currently employed so no bonuses as of the moment, but again I am looking towards the future.
- Sell unwanted stuff on eBay/Craigslist: I am currently doing this. I basically took an inventory of everything that I own and really looked at the items to determine if I really used them or if they were something I wasn't using anymore and thus clutter. I started doing this when our only vehicle died. I am unemployed and have no savings and although my partner is employed he doesn't have any savings either. My partner pretty much pays all the bills. I get some general assistance from the state: $200 a month. So with no savings and a need for a vehicle I became creative and started thinking of ways to get the money we needed for another used vehicle. Which is wear craigslist come into play. I took every item I wasn't using and put it up for sale. I have made about $65 so far, it's not much, but every penny counts.
- To be frugal, but not insanely frugal.: I am currently doing this one. I am doing anything from finding ways to stretch the grocery budget to using coupons and buying things on sale, have a rebate, have ECBs or RRs.
- Have $1,000 in an emergency fund.
- Save 6 months of expenses.
- Have a stockpile.
- Own a home free and clear (no mortgage.)
- Have no debt.
****disclaimer: I am not a financial planner and have no training, everything is in my opinion and based on what I know. Do your own research, consult a professional, and do what works for you.