New year, time to max out my HSA and 401k! Here is the breakdown of how I spent/invested my first paycheck of the year.
I have put together a plan to be more intentional this year to max out my accounts.
Things You Must Do To Make A Plan
First, you must have money to cover your living expenses! You can’t change your contribution limits on your 401k and HSA if you won’t have money to cover common expenses. There are two main things that help me be able to be as aggressive as I am.
House hacking is the first. If you aren’t familiar with this term, checkout my podcast where I talk about it. You can also read a recent article I wrote about what I do. High level, I live for free and even make a few hundred bucks each month from renting out individual bedrooms in my home. This is one of the most powerful ways to reduce your expenses.
Now that you have your common living expenses covered, it is important to update your contribution amounts. I wrote another article about how I calculated what I could afford. There are certain limitations when contributing to your 401k and HSA. For example, my company will allow you to only contribute a max of 50% of your paycheck to your 401k.
- I am a firm believer in front loading my 401k and HSA accounts. It hurts on the first 4-5 paychecks of the year, but it is worth doing if you have a good plan.
- Make sure you are able to cover common living expenses if you decide to front load. I have developed many streams of income allowing me to still cover common expenses.
- At the beginning of the year, update your contribution amounts with your employer. There are certain limitations you might run into. Talk with an HR rep from your company to find out what those are.