3 Ways to Buy Time (Today and in Retirement)

If you asked people what they wish they had more of in life, almost everyone would say “time.” With the hectic pace of our modern lives, finding time to do the things that really bring joy can be difficult. And for many people, spending time dealing with saving, retirement planning, and other personal finance issues ranks right up there with a root canal.

But what if you could buy back that time without sacrificing the benefits of a solid financial plan? Through the power of automation, you can have the best of both worlds—a solid financial future AND getting extra time back to spend with family, friends, or working on your favorite hobby free from the worry of money.

By automating your finances, you can buy time in two ways:

  1. Saving time every month by not having to transfer money between accounts or remember to make contributions to your retirement funds.
  2. Setting up a system to automate your savings goals and get to retirement faster

While saving time today is important, I think even more important is the time you are buying later by setting up an automated system to fund your retirement. If by automating your savings you’re able to save and invest more consistently, your money will have more time to grow and you can even retire years earlier than you otherwise would!

With that in mind, here are 3 easy things you can do today to automate your savings and retirement plan, so you can spend less time worrying about your finances and more time enjoying life.

1. Pay Yourself First by Automating Savings

Saving money is hard enough as it is. I don’t know about you, but if I’m the one in charge of having to set up a transfer from my checking account to savings account every month, more often than not it just doesn’t happen.

Why You Aren’t Saving Money and What to Do About It

There are tons of financial statistics about the sad state of American finances that show most people have a difficult time saving money. Regardless of age or income level, many live paycheck to paycheck.

When left to our own devices, we tend to take the path of least resistance. If our bank account is flush with cash, we spend more freely until it starts to dwindle. Then at the end of the month we look back and wonder where all the money went.

This mindset of saving whatever is leftover after the bills are paid leads to frustration and hopelessness when it comes to saving money. Like a dieter who starts off with good intentions and a solid plan, the temptation to consume proves too great, and eventually he abandons the diet (or savings plan) thinking he is a failure.

But with a simple mindset shift, you can go from spender to saver and hardly even notice the difference. In my own life, I’ve noticed that when I try to do things by sheer willpower, it never goes well. But if I remove the temptation, reaching my goal becomes much easier.

In the dieting example, it is very difficult to stick to a healthy eating plan if you have to reach past the ice cream and frozen pizza to get to the vegetables behind them. Instead, if you remove the temptation (the foods you shouldn’t eat) from the house, it becomes much easier to choose the healthy option.

In the same way, if you set a savings goal and automate the bank transfer, you are removing the temptation of having money to spend in your bank account. So not only are you increasing your chances of success to save money, you are saving time as well!

Tips for Automating Your Savings

Once you spend a little bit of time up front defining your savings goal and the plan for your money, automating that plan is easy and will save you time month after month. Here are a few options to automating your savings so you don’t ever have to touch the money or think about it.

  1. Set a clear savings goal – Whether you’re saving for an emergency fund or vacation, make sure you have a clear goal and timeline that you can control.
  2. Make recurring transfers from your checking account – If you know you get paid every other Thursday, you can set up a transfer to occur right after the money hits your account. This will save you time and brain space so you don’t have to remember to do it – it just happens.
  3. Use direct deposit to divert money from your paycheck before it ever hits your bank account – If you get paid by direct deposit, you can often set up multiple transfers to go to different places. For example, if you want to save 10% of every paycheck, you can set up the direct deposit to put 90% in your checking account and 10% in your savings account automatically.
  4. Set up an online-only savings account at a separate bank than your checking account – One easy way to resist the temptation to spend your savings it to make the money just a little bit harder to access. If you set up your savings account with a separate bank, you won’t see the balance every time you log in to your checking account. In addition, transferring money out of savings usually takes 2-3 days – quick enough if you need it for an emergency, but long enough that you won’t be tempted to spend on an impulse buy.

2. Automate your 401(k) Contributions

Another way to buy time through automation is to set up your 401(k) contributions going into your employer-sponsored plan.

It’s no secret that the average American family is not saving enough for retirement. There is a lot of confusion as to how much you should have saved, but the standard advice is to put 10-15% of your income into retirement accounts. Even if you are saving the recommended amount for retirement for your age, making sure you have a system set up so you can set it and forget it is important.

Most employers will match up to a certain percentage of your salary, so if you’re not contributing at least that much you are throwing away free money! In addition to setting the percentage of your paycheck that goes into your 401(k), you can also choose your asset allocation for each deposit. If you’re not sure what your asset allocation should be, run this check-up with blooom.

For example, in my own 401(k) I split each deposit into 5 different low-fee funds offered by my plan to automatically diversify my investments. If you’re already contributing to your 401(k), it’s important to check what exactly you are invested in. Often if you don’t specifically set up which funds you want to buy, your money will be going into cash or a money market fund which may return only 1-2%. Make sure you are putting your money to work and not letting it sit collecting dust!

One more thing that many 401(k) plans allow you to do is to automatically step up your contributions each year. This is another great way to buy more time in retirement by slowly increasing the amount you set aside every year. If you’re currently contributing 10% but you want to eventually get up to 15%, you can set it to automatically increase 1% a year for 5 years. If you time it when you receive your raise, you won’t even notice the “missing” money.

3. Automate Your Spending

Once you’ve automated your savings and retirement investing, the last thing I’d automate to save time and stress is your bills. Between the mortgage payment, credit card, Netflix, phone, internet, and a dozen other recurring bills, setting up auto-pay is a must to save time (and your sanity.)

It will also save you money if you can avoid late payment penalties for those times you forget a bill is due (it happens to all of us.)

While I am firmly entrenched in the “auto-pay all the things” camp, I understand that some people are a little more wary of allowing creditors to automatically take money out of your account each month. If that is you, I would recommend setting up bill pay through your bank. While this is a semi-automated solution, you get alerts when a bill is due, and the only thing you have to do is click a few buttons to pay. The benefit of this method is you are still in control of when and how much money is taken out of your account.

And if you’re like me and really want to squeeze some extra money out of the bill pay process (to add to your retirement savings of course), I highly recommend getting a good cash-back credit card to earn 1-2% on every transaction.

In addition to that, I use a few of the best cash back apps like Ebates or Drop to stack even more savings on top of my normal shopping. Between these two things, I can generally add an extra $1-2,000 to my savings accounts each year.

While it’s not a ton of money, I look at it as slowly but surely buying back time as I get closer to financial freedom!

 

About the Author

Andrew Herrig is the founder of WealthyNickel.com where he writes about his family’s pursuit of financial independence. He is passionate about helping others build wealth through side hustles, saving money, and wise investing.

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2019 401(k) Contribution Limits

Remember that resolution you had in January? You know, the one about contributing more to your work retirement plan this year? How’s that going? 

As we get set to wrap up 2019, now is a great time to revisit whether or not you are making the most of your retirement account at work. When it comes to your 401(k) or 403(b), you have until December 31st to maximize your contributions, if you can afford to. So what exactly are we talking about when we say maximize your contributions? Here are the IRS contribution limits for 401(k) and 403(b) accounts, for 2019:

Amount YOU can contribute this year

Under 50 yrs young: $19,000

50 or wiser: $25,000 ($19,000 + $6,000 catch-up allowance)

Keep in mind that this is the total amount you can contribute, regardless of what your employer may offer to match. Whether or not you decide to contribute pre-tax, roth, or a combination of both (if your plan allows), the total cannot exceed these numbers for the calendar year. 

If your plan does allow both pre-tax and roth contributions, we generally recommend splitting your total contributions to the plan between each. This allows you to reap the benefits of each and hedge against the uncertainty of your future tax situation and future tax law. 

As a general rule of thumb, if your employer offers a match, we recommend contributing as much as you need to in order to take full advantage of that match, at the very least. An employer match is essentially free money and if you aren’t contributing enough to get the full match they offer, you’re leaving money on the table, which can potentially take years of retirement income away from your future self. 

You still have time! 

As the year winds down, many of you may have an end-of-year bonus or raise coming. Both of those are great opportunities to give your 401(k) a boost toward maxing out your contributions. 

Pro tip:

If you’re not able to maximize your contributions just yet, a great habit to start this year is to simply start small. Consider bumping up your contribution percentage by just 1%. See how that impacts your budget over the next 6 months or so and consider increasing by another 1%. 

Over time, these small incremental changes will help you naturally adapt your budget to your savings goals, instead of the other way around, where savings is the afterthought. “Pay yourself first” is a great motto to live by. Many plans even offer an “auto-escalation” feature, where you can set a specific timeline and increment for automatic increases over time. Check with your plan administrator/HR department at work to see if this is available in your plan. 

 

Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

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3 Ways To Save For Retirement as a Digital Nomad

If you’re a digital nomad, you know that life on the road isn’t always as glamorous as your Instagram account makes it out to be. While the lifestyle certainly gives you more freedom than a traditional 9-5 job, it can also be worrisome. Most digital nomads are contract workers or freelancers. They may not have a steady source of income, and they most likely don’t have company-sponsored benefits like health insurance and a 401(k).

For most digital nomads, life is lived more in the moment, dreaming about the next destination, than it is planning for retirement. But truth be told? It shouldn’t be. If you enjoy traveling, why not start saving for retirement so you can retire young and keep living the nomadic lifestyle?

Here are three ways you can start saving today (regardless of how much you’re making):

1. Become Debt Free 

If you don’t have credit card debt or student loans, we applaud you. Go ahead and skip to number two.

Unfortunately, the average American has $38,000 of personal debt (excluding mortgages). Millennials and Gen Z have $42,000 and $22,000 respectively, most of which is from student loans and credit cards. While we wish we could go back and tell our younger selves “don’t get into debt!” if you’re in it, it’s too late. But it’s not too late to get out of it.

Our biggest piece of advice for you is to get out of debt ASAP. With interest rates upwards of 22%, your debt is increasing by the day and the longer it takes the pay it off the more you’ll owe and the less you’ll be able to save.

Start by calling your credit card company and ask if they’ll lower your interest rate. Even lowering it just a few points can help you save. It’s a competitive market and the worst they can say is no.

You can also look at transferring your debt to another credit card that will give you up to 18 months interest free, refinancing your student loans, or getting a personal loan from companies such as SoFi, Earnest, or Lightstream.

2. Set a Budget (And Stick To It)

If you’re truly serious about saving for retirement, you’ll need to understand your spending habits.

Sit down and review your expenses from last year (thankfully, online banking makes this relatively easy). Sort your expenses into various categories such as lodging, transportation, dining out, grocery shopping, entertainment, insurance, and “other”. How much did you spend in each category per month? It may be more than you think. If it’s too daunting to do this for the whole year, try looking at the past month. There are apps for budgeting you can look into for this!

Once you have an idea of how much you spent per category, start looking for areas you can cut back. There will be fixed costs such as cell phone bills and insurance, but for the more frivolous categories try and find areas to save. Are your restaurant bills averaging $400 a month? Start cooking more! Spending a lot on taxis when you could be taking the metro? Learn to love public transportation.

With your expenses laid out in front of you, set a budget for each category. It’s imperative that the budget be realistic otherwise you won’t stick to it. Your budget shouldn’t blow through your entire paycheck, either. In fact, you should have some money leftover.

With your categories and budget in front of you, add two more categories: savings and retirement. This is where that leftover money will go. Savings is what you can dip into should you be presented with any unforeseen expenses or emergencies, and retirement is the category that should remain untouched outside of investments.

Allot a specific amount of money that you can realistically afford to put into savings and retirement each month. If it’s only $50, that’s okay. Just make a plan and stick to it.

Just make sure you stick to your budget and add to your savings and retirement accounts what you promised yourself you would.

3. Pay Yourself First

Remember those two categories we just told you to add to your budget? Savings and retirement? When you get your paycheck, make sure you put the allotted amount into these accounts first. If not, you may be tempted to spend that money on other things.

We keep stressing the word “realistic” for a reason: if you set goals for yourself that are too egregious, you likely won’t stick to them. Thus, if $50 is all you can afford to put into your retirement account right now, that’s fine. Just make sure you keep yourself accountable and actually put that $50 into the account each month.

If you end up getting an extra gig or finding additional ways to save and bring in a bonus $500 one month, that’s great! But try and stick to your original budget and put as much of that into your savings or retirement accounts as well.

When it comes time to retire, you’ll be glad you put as much as possible aside each month rather than spend it on frozen cocktails in a new city.

 

About the Author

Leigh Kunis is a Top 5 blogger who left NYC two years ago to embrace the digital nomad lifestyle. You can typically find her “somewhere in Europe” writing about travel, digital marketing, and more.

 

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3 Ways the Next Generation is Saving More For Their 401k

Retirement always seems so far away until it isn’t. Putting off saving will make it much harder to have enough so you can comfortably live and pay your bills in your golden years.

One of the best ways to save for retirement is through tax-advantaged plans sponsored by your employer. Putting cash away now will help you set yourself up for financial success down the road.

Here are three ways that the next generation is saving more for retirement and using their 401(k) plans to build wealth.

1. Maxing Out Company Benefits

One of the best ways to save money for retirement is by taking advantage of your company’s benefits. Many employers offer a way to save for retirement, such as a 401(k) plan. Setting up an automatic deposit from your paycheck is one of the fastest ways to increase your balance.

When the money is taken out of your paycheck, you don’t see it in the first place so you don’t miss it. It’s a great way to trick yourself into saving and make it painless. Make sure you’re contributing enough to take full advantage of your company’s match – you don’t want to miss out on any free money.

This is one of the best ways the next generation is saving more for retirement. Tapping into your company’s retirement matching is a quick way to boost your savings rate by taking advantage of the free money.

Many companies offer to match your retirement dollar for dollar up to a certain amount. For example, they may offer to match the first five percent you put into your 401(k) every paycheck. This means you’re saving 10 percent from every paycheck for retirement, but only 5 percent is coming out of your actual compensation.

The free money continues to grow in your account with the rest of your contributions, earning interest and getting you that much closer to retirement. There is usually a vesting period until you fully own all matching contributions free and clear. For most companies, it’s in the 4-5 year range.

Check with Human Resources or your plan’s administrator on the vesting rules so you don’t miss out on getting the full amount.

 

2. Making Extra Money

Another way the next generation is saving more is by making more money. The rise in popularity of the gig economy offers new ways for people to make extra money outside of their regular paycheck.

The cash can be used to pay off debt, save for a big goal or possibly, pad a retirement account. Since contributions to traditional retirement accounts come with tax benefits, this is a great way to shelter some of the extra income and lower your tax burden.

There are many options for making extra from driving for Uber and Lyft to consulting or freelancing gigs. Every dollar counts and finding something that fits with your schedule and skills is key.

Other ways to make money include selling things on Facebook Marketplace or via eBay. Many people find good deals at yard sales or second-hand stores and resell them online. If you know what to look for, you can find some gems in the rough and flip them for a tidy profit.

If you’re good with animals, you can start a dog walking and sitting business. This works especially well in big cities with busy professionals who don’t have time to take their furry friends for a walk.

Another way to make money is by renting out a room in your home. Popular sites such as Airbnb make it easy to list your place for a few nights a month and make money. If you’re willing to take on a full-time tenant, you can consider a longer-term rental.

Other gigs you can try include grocery delivery, teaching English online and even tutoring. Companies such as VIP Kid will pay you to help others learn a new language.

The key is making sure the money gets put toward paying down debt and padding your 401(k).

3. Cutting Expenses

Last but not least, cutting back on expenses is a powerful way to save more for your 401(k). If you don’t have a budget, setting one up is the first step toward taking charge of your finances.

Already have a budget? Review your monthly spending and pinpoint areas where you think you can spend less. Some line items to consider slashing include dining out, grocery shopping, entertainment, utilities, gas, and more.

There are many ways you can slash your expenses without compromising your quality of life. One way to cut back on groceries is to make a meal plan for the week, shop with a list, and buy what’s on sale.

To cut back on dining out and entertainment, consider hosting a potluck or a game night. This way you still get to hang out with your friends and have fun for a fraction of the cost. You can also go out and pre-game by having some food and drinks before heading out.

If you’re looking to cut back on your commuting costs, consider carpooling or taking public transit. If you live close to your work, biking or walking may also be good options. In densely populated areas, heading out on foot or a bike can save you time sitting in traffic.

Consider cutting back on things you don’t use or finding a more affordable alternative. If you don’t watch cable, consider canceling it and going with Netflix or Amazon Prime Video. Both offer great entertainment options at a fraction of the price of cable.

Regardless of how you cut expenses, make sure you put the money you save to good use. As you make more money and cut back on expenses, increase your 401(k) contributions. Most plans will let you change your contribution amount as much as you want. The more you can contribute to your 401(k) the sooner you can get to your retirement – now that’s not a bad tradeoff.

 

The Bottom Line

Saving more money for your 401(k) takes some planning but you can definitely do it. Set a goal of when you would like to be maxing out your 401(k) and then craft a plan to get there with some of the tips we gave you today. Best of luck and happy saving!

 

 

About the Author

This is a post from Clint Haynes, a Certified Financial Planner® and Financial Advisor in Kansas City, Missouri. He is also the founder and owner of NextGen Wealth. You can learn more about Clint at his website NextGen Wealth and on the NextGen Wealth Facebook Page.

 

The information is provided for discussion purposes only and should not be considered as advice for your investments. Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

 

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3 Ways to FIRE Without a Six-Figure Salary

A few years ago, I achieved FIRE (Financial Independence, Retire Early) at 33 years old. My goal wasn’t to stop working altogether. Rather, it was to have the freedom to do the things I wanted — like travel for six months out of the year — and pursue passions instead of worrying about how I could pay the bills. 

You may think I had a huge salary, but that wasn’t the case. Neither I nor my wife earned six figures at our day jobs — but we didn’t reach FIRE on our salaries alone. 

I did three simple things — earned more, spent less, and saved more. 

Want to know how you can FIRE, too? Here are the three steps I took in more detail.

1. Earn more

Thanks to a treasure trove of side hustles — you name it, I’ve probably tried it —  I was able to earn a lot more money and put it into savings, real estate, and investments, helping me reach FIRE. Believe me, I’ve been involved in lots of side hustles. Some of them included being a mystery shopper, participating in focus groups, and reselling items. 

Buying and reselling items helped me earn a ton of money — I bought things from garage or estate sales as well as new items if I found them at a deep discount (often using coupons). Items I’ve sold include electronics, gift cards, wooden furniture, and even daily essentials like toilet paper and shampoo.

At times, I also took second and third jobs. I did everything from working odd jobs as a handyman, dealing cards for a local event company, and even social media consulting. 

Earning more doesn’t have to be hard, either — my easiest gigs were focus groups where I made up to $125 an hour. Plus, I typically was given free stuff. 

To find different types of side hustles, join communities online or do a quick online search to see what’s available in your area. You’d be surprised at how much money there is to be made with side gigs.

2. Spend less

I have a confession to make: I was really bad with money in my early twenties. Like, the perfect example of what not to do. I bought anything and everything I wanted with no regard for my budget. I ended up broke and $25,000 in debt when I was 22 years old. 

Thanks to my now-wife, who gave me an ultimatum — figure out my financial situation or she’d break up with me — I became debt-free. How? I sold my cars (yes, I owned multiple vehicles) and stopped buying stuff I didn’t need, which included an expensive cell phone plan, cable, clothes, meals out at restaurants, and even haircuts. 

Getting out of debt can help you funnel your money into savings and investments, which is what I did. Being responsible with money is necessary if you want to FIRE. Take a careful look at your expenses and see where you can cut back. Be honest — are the things you’re spending on really necessary?

Taking advantage of credit cards is another way to save money. When I was buying and reselling items, I used rewards credit cards to rack up points. The points and miles I earned were used for travel — most recently, I cashed them in to buy a rental property

We built up our rewards points from different credit cards by earning sign-up bonuses, using cards for everyday spending, and getting referral bonuses. I also stacked my rewards-earning potential by using shopping portals and cashback apps to earn even more points and miles. We then redeemed our points for checks (aka cold, hard cash), which we used toward the down payment of a rental property.

There is so much opportunity to earn rewards points and miles using credit cards. It depends on the card, but you can score free travel, merchandise, gift cards, or cash back, like we did. 

I will say, be responsible with how you use credit cards. Only spend what you have and never carry a balance — or else you’ll negate all the rewards you earn. 

3. Save more

Saving is an important component to FIRE, but it’s not enough to stash money away in any ol’ account. For long-term savings, I chose a brokerage account that offers low fees, a solid track record, and many options. 

If you have a 401(k) through your workplace and your employer offers to match a certain percentage of your contributions, don’t leave free money on the table. Contribute as much as you can to your 401(k) account, at least up to the point of your employer’s match. Start with a small percentage of your paycheck if you have to and work toward increasing that amount. 

For short-term savings, consider using high-yield savings accounts. Many online banks offer high rates that can help you earn a decent return and still provide the liquidity you need, like for an emergency fund or when you’re saving for a large purchase. Many of these accounts don’t charge monthly fees like big banks, so you can save even more. 

Wherever you choose to park your money, automating your savings ensures that you’re setting aside money each month toward your goals. You can easily do this by setting up a recurring transfer to your savings account that automatically happens on your paydays. You can increase the amount you save over time, which can help you reach FIRE faster.  

Final thoughts

I don’t blame you if you think reaching FIRE means you need to have a high salary to succeed. But you now know that’s not the case. With some careful planning, hard work, and shifts in your budget, you can get closer to having the freedom you crave without worrying about how you’ll pay the bills. 

 

Author Bio: Brandon Neth is a credit card and reward travel expert. He runs social media and audience growth for FinanceBuzz, including the FBZ Elite Facebook travel group. He’s spent the last 11 years using credit card points and miles to travel the world, taking him to 600 cities in 76 countries and counting. Through side hustling and starting small businesses, maintaining a frugal lifestyle, and careful budgeting, Brandon achieved leanFIRE at age 33 and is on his way toward fatFIRE. Brandon also owns real estate investment properties, most recently purchased with the help of credit card points.

The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed. Investors should consider their ability to continue investing through periods of fluctuating market conditions. Please consult an investment advisor before you invest.

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