Small Steps to Saving

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