Who doesn't want to have a lot of money? I want to be financially secure so that I am able to retire at a reasonable age. Here is how I plan to achieve my goal.
I will participate in my 401K. A 401K is a company sponsored retirement plan where they take out a percentage or a set amount out of your paycheck a month and store it in a tax-deferred account. Sometimes employers will match about half of the contributions made by the employee. I plan to invest 10% of my pay to my 401K. That will be approximately half a million dollars at age 45 just in my 401K. On top of my 401K I will have another 5% of my paycheck go to a savings account. I will "forget" about this savings account until it is time for me to retire.
To add onto my salary I will buy a house and rent it out. I figure the average cost of a house is $100,000. I could get low monthly payments on a mortgage that rent would more than cover. The money I make off rent minus the mortgage payment and other expenses for the rent house I can put in a low risk high return investment and earn even more money.
When looking at past purchases, I have noticed that I spend a lot money on eating out, Starbucks coffee, and little things I wanted that I really did not need. Eating out just 3 times a week can cost up $120 a month and about $1,400 a year. Instead I could pack a lunch for prepare food in advance to cut the cost of eating out. Also another advantage of not eating out is that home cooked meals are much healthier. The extra salt and fat in fast food can pack on the pounds. I love Starbucks coffee! However, every time I go I spend $2-$4. I started making coffee at home and bringing it to work and class and I have seen a small difference in my bank account. Everyone thinks that the small purchases are not going to make much of a difference in their budget, but in reality they make a huge difference. I stopped buying things that wanted and started just buying things that I need. It is okay to splurge every once in a while, but I try to purchase the necessities.
With these plans I hope to never have financial struggles and retire at a reasonable age.
6 comments:
You are exactly right. I love the idea of making coffee at home and saving the $2-$4.
You have put a lot of thought and financial planning into your goals. I am confident you will achieve them.
I think the rent house is a great idea. 401K will also be great for retirement!
This was a very inspiring blog, I'm gonna take down a few pointers from it and hopefully think of a few more of my own.
I definitely agree with you on cutting back on the everyday purchases. It is incredible how much you can save just by cutting back on some meal and entertainment expenses!
I got a little tip on 401K plans from a financial advisor. He said it could actually be more beneficial to invest in a ROTH 401K plan for your first few years. This will allow you to pay the tax at a lower interest rate, while you are in a smaller tax bracket. Then you won't owe any tax on the capital gain when it's time for you to retire!
Thanks for the tip Brittany! I will keep that in mind!
Post a Comment