Small Steps to Saving

I’ll be the first to tell you I have a problem with doing the dishes. dishes

“uh, Gwen…? How are dishes related to saving for retirement?”
I’m getting there. Go with the analogy flow for a second.

Dishes. I hate doing them right after cooking. It’s bad enough I have to make my own food, but then to do the dishes by myself afterwards? Insult to injury. I’m ashamed to admit it, but I will let them pile up until I run out of dishes to use.

Until I moved out on my own, someone had cooked for me my entire life. Parents, school cafeterias, military…. I sat down and boom! Food appeared whenever I wanted it. Then I gave the dishes to someone else when I was done and they magically vanished!

Now…… I am that person that does both the cooking and cleaning. There are sometimes (this is even worse than the pile of dishes pictured) where I just won’t eat because I don’t feel like going through the effort. I know, it’s terribly unhealthy behavior and I’m working on getting better.

Usually what ends up happening is I rinse all of them, stack them on the counter and/or sink, and then proceed to try to ignore the every growing mountain of precariously stacked dishes. For about a week, or as long as I can possibly put it off. I then dread the cleaning and have to stand around for upwards of 45 minutes doing the dishes, when I could literally be doing anything but that. Also, it makes my knees/legs hurt.

You know what I’ve found though? If I do the dishes right away after dinner, or heck, even during the prep process when I’m waiting on it to cook, it’s NOT such a chore! Get done eating, clean off the plate, scrub the silverware, dry it all, put it away and it’s like I didn’t even use them. Then I’m free to do whatever else with my time. Not to mention, it’s tons easier to clean a plate with spaghetti sauce right away. THE LONGER YOU WAIT, THE MORE DIFFICULT IT GETS.

This doesn’t apply just to dishes. This applies to almost everything in life. (Ahh you say, now I understand why I just read all the dish related talk). It very much applies to saving for retirement.

Think about it. You’re out on your own, with your first job. You get that sweet, sweet first paycheck, and wonder, WOW they’re paying me that much!?! COOL! (Protip: don’t look at the amount you get before taxes and all that jazz comes out. It makes me sad every time I do.) You get used to having that much come in every other week, and if you’re not careful your lifestyle will inflate to your new income level.

You can do one of two things to avoid this.

Option 1:

Start out by maxing all of your retirement accounts possible: 401(k), HSA, Roth IRA and any other tax advantaged account. You’ve never seen that money hit your bank account so it’s like you don’t earn as much as you do. For instance, making $90k turns into making $64k. You’re still making lots of money (definitely more than you were earning as a college student), but you can’t spend money you never even see! $65k turns into $39k!

I know, this seems backwards. Normally people celebrate their salaries going up, not down. But, by starting out with the max contributions, you won’t have the chance to learn bad spending habits. And the tax savings will be nice come tax time in April. This is how I was able to save $35k my first year.

Option 2:

Start out with putting just enough into your 401(k) to get the employer match (if offered). Then, when the initial buying phase is over (you know, for things you didn’t have before like a bed, dresser, table, and other house necessities), bump up the contributions until you’re maxing it out. This is the tougher option by far. It requires you to willingly reduce your paycheck.

I’m not saying you need to bump it up from 6% to lets say 30% in one big jump. You can do it slowly, in little chunks, over time to lessen the impact on your budget.

I gave myself 3 months from my start date to have higher paychecks and buy what I needed for my house. When that 3 months was up, I gradually increased my contribution percentage until I maxed out my 401(k) for the year. I’m not going to lie, seeing my paychecks go down was rough. Especially when I was updating my spreadsheet and watched my income “drop”. I’m doing future me a favor by saving so heavily, but man. Having less money to spend was a bit of an adjustment at first.

“Hey, I can totally afford that shiny thing!”
*checks account balance*
“Or not…”

It only took me 3 months to get used to a base level of income. I HIGHLY recommend you start out putting as much as you can into your 401(k) so you don’t have to deal with your paychecks going down.

So, dear readers, here is my challenge to you. Look at your 401(k) account settings and see what percentage you’re contributing. If you are already maxing it out, give yourself a hearty pat on the back! If you’re not maxing out yet, add 2% to your contribution. I bet you’ll be surprised by how little you miss that 2% and how quickly you adjust to seeing your 401(k) balance go up faster!

How much are you saving? When did you start saving for early retirement?

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