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Maxing Out Your 401(k) by Your Second Paycheck In March

Woah, now! I know what you are thinking. There is no way in hell you could max out your 401(k) by the middle of March. How did you do that? Or, why the heck would you not just steadily invest in your 401(k) throughout the year and hit the max contribution by your last paycheck?

Well, as so many other things I am currently doing, I want to swim outside of the normal path to retirement. Does retiring at the age of 65 and then living your best life sound appealing to you? How could it when you have the ability to do it while you are young and have your whole life ahead of you!

At the end of 2018 I (for the first time in my life) outlined goals I had for myself for 2019. If you want to see all my goals, checkout the article here 🙂 One of the major goals I set out to complete was to max out my 401(k) by the end of March!

Why? Why would I want to max out my 401(k) so early in the year you might ask? Maxing out your 401(k) at the beginning of the year allows for that money to potentially grow for a longer period of time! I would also get the matching 6% from my employer so I am essentially double dipping in how my money is performing for me. Another great benefit of completing this early in the year becomes having a huge paycheck for the back half of the year! While I have been used to paychecks being the same all year, I can now invest much more for 75% of the year. Can’t wait to see what all that entails this year.

Here is a snapshot of how much $$$ I ended up investing from each paycheck to reach the maximum of $19,000 for 2019!

That ends up bringing my total contribution this year, for both my individual maximum of $19,000 and my companies match of $6,474 to $25,474.

Now here is the great thing that is going to blow your mind. My company is going to match 6%. Since my current salary is $170,000/year, that equates to $10,200 of company match! Since my company isn’t used to individuals maxing out their 401(k) this early in the year, they won’t end up paying out the full $10,200 until my last paycheck of the year. I should see my 401(k) grow another $3,726 by the end of the year.

Can’t wait to see what my account looks like by the end of the year, here is a current snapshot as of 5/27/19.

Do you agree with the strategy outlined above? I would love to hear your thoughts!

If I were to start over again, the advice I would give my 22 year old self would be:

  • Max out your 401(k) every year – period. Learn to live below your means.
  • Allocate your 401(k) funds to a low cost index fund if available
  • Try to max out your 401(k) as early in the year as possible so your paychecks grow later in the year and you can invest that money elsewhere

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Horizontal (Passive) Income Streams and Why They Are Important

How many different horizontal streams of income do you currently have? Are you like the 99% of Americans who trade their time for money as your only source of income? I have finally figured out this is one of the largest mistakes you can make if you want to hit Financial Independence.

A few weeks back I heard one of the best quotes I have heard in a long time. “If your money isn’t making money for you when you are sleeping, then you are doing something wrong.” This quote got me thinking about how many horizontal income streams I have.

What is a horizontal income stream? A horizontal income stream is a specific asset you are generating income from on a monthly, quarterly, or yearly basis.

As I started to lay out my compelling scorecard I would be using to track my progress and see how I am progressing towards my goals, I outlined a goal of getting to 10 horizontal income streams.

Here is the current state of my horizontal income streams:

I have made large strides to put myself in a position to continue working my way to financial freedom. I have come a long way from only having one source of income, yet, I know I still have so much to learn from the community and getting my $$$ to make more $$$ for me.

Challenge: I challenge you to think of how many income streams you currently have and whether or not you should begin thinking about expanding your horizontal income streams!

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2018 Accomplishments!!!

Now that we enter a new year it is always good to go back and look at everything I was able to accomplish this year. Below are the highlights of my path to Financial Independence:

  • Opened a Vanguard account and transferred $70,000 I had sitting in my bank account. Setup two auto investments to purchase $1,550 every two weeks in VTSAX
  • Started this blog to document my journey to Financial Independence:
  • Started an Instagram account to supplement the blog. IG: theyoungretireeby33
  • Decreased my car insurance monthly payment by $100/month by negotiating terms
  • Cut the cord for cable saving $60/month
  • Stayed 100% rented out in the two additional bedrooms in my home renting one for $1,000 and the other for $900. My mortgage payment will drop to $1,750 beginning in February 1st, 2019.
  • Created a Personal Capital account to track my Net Worth in a very simple one stop shop
  • Created a detailed expense tracking spreadsheet that will project out net worth by the pay check. This spreadsheet even goes as detailed as to outline when I will place money into my 401k, HSA, and Roth.
  • Maxed out my 401k for the first time ever in my working career
  • Wrote out my goals both personally and professionally
  • Homestead my property to reduce taxes by approximately $700/year
  • Enrolled in a HSA plan at work so I can take advantage of what people in the FI community say is one of the best kept secret tax advantaged accounts
  • Received $1,700 in travel credit through taking later flights on busy days from Delta
  • Put a heavy focus on excelling at work and I was able to increase my total compensation from $119,165 to $177,424. Increasing my income continues to be a focus in my life so I can speed up my path to FI
  • Used tax loss harvesting to save over $10k in taxes in the next 5 years

What can I say, I took the idea of FI and took it to the next level based off what I learned at the time. Now it is time to 10x again! Let’s go 2019!