Looking to retire and live the retirement you've imagined? Book after book and expert after expert repeats a similar theme: Pay Yourself First!
What does this mean?
Automated your retirement savings so the money you are setting aside never hits your checking account. We all know what happens to money in the checking account - it gets spent on STUFF. Automate retirement with 401(k) or combo of direct deposit to different bank account and send it automatically to an IRA or Roth IRA.
My own Example:
At age 24 I was able to sign up for my first 401(k) plan and put in 20%. Making $26,000/year (on a draw!), that was a lot of money for a single broke guy. But living in a small apartment in downtown Alma, MI, living on couscous and frozen vegetables, loading salt blocks in the water softners weekly at local laundromat for free laundry, what the heck difference did it make? The income was pretty low either way. So I signed the 401(k) enrollment form, entered 20%, took a deep breath, and mailed the form in. Little did I know that 20 years latter, that little habit would still be with me.
The percentages have varied slightly over the years, the family has grown, but so have the retirement accounts (not every year, thank you 2001 dot-com bubble, 2008, and more to come) over the long term. Today, the retirement Amy and I want is on track because we pay ourselves first!
For more on Paying Yourself First, check out this helpful article: Paying Yourself First.