Tag: retirement savings

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How I Invest Almost 100% Of My Paycheck – February 9th Update

Time for an update on how I invest almost 100% of my paycheck every two weeks. I find it more and more fun to continue watching progress towards my financial independence. A big component of this is investing almost 100% of my paycheck. When you can automate many of your investments, you allow yourself to sit back and watch cool things happen.
 
Where My February 6th Paycheck Went?
Here is the breakdown of where my paycheck went for investments:
  • $1,000 to my HSA
  • $1,200 to VTSAX in my Vanguard account
  • $3,269 to my 401k
I am continuing to hold strong at the beginning of the year with very small paychecks coming through. It is funny when you go from a paycheck being a little over $4k at the end of the year to $1,200 at the beginning. The main driver behind this is the heavy investments in my tax advantaged 401k and HSA accounts.
 
For these specific accounts, I never see the money hit my bank account. And for me, this is a great thing. For many, when you see money in your bank account you will think to spend it. For me, seeing money in my bank account makes me cringe. I cringe mainly because if money is sitting in my bank account, then it isn’t making money for me! This is my first core principle: Your money should make money for you. 
 
Why I Contribute To MY 401k
I highly recommend for everyone to take advantage of some key accounts if you access to them. A 401k is one of the accounts I try to take full advantage of. To read more on what the advantages of a 401k are, click the link above. 
 
There are two main reasons I invest in my 401k. First, it is a tax advantaged account that allows me to save $6,825. My last bit of salary is in the 35% tax bracket, which is why the amount of tax savings is so high for me. It is really a no brainer for me to max out this account each year.
 
Second, my employer offers a 6% match on my 401k contributions! That is right. Free money. Who can say no to free money?! I know I definitely can’t. This year, I will receive a match of $10,200 from my employer. I could not be more grateful for the match opportunity my employer provides.
 
Three more paychecks to go before my 401k will be maxed out! I am excited to start seeing larger paychecks coming into my account soon.
 
Key Takeaways:
  • Automating your investments allows you to not see the money hit your bank account. It is fun to sit back and watch your investment accounts grow!
  • Living paycheck to paycheck is an incredibly powerful. No matter how much you make.
  • Don’t miss out on your employer’s 401k match if they offer it! If you say no to the match, you are throwing away free money!

 

 
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How I Invested Almost 100% Of My Paycheck In Retirement Accounts

Second paycheck of the new year in the books and I invested almost 100% of my paycheck into retirement accounts! This continues along with the strategy of front loading my investments at the beginning of the year. Being able to invest almost 100% of my paycheck into retirement accounts will allow me to max out my retirement accounts by the end of February. Let’s take a look at where my money went.
 
Breakdown of Second Paycheck
The total amount for my second paycheck of the year was $6,538. Of that, here is the breakdown
  • 401k: $3,269
  • VTSAX: $1,200
  • HSA: $1,000
  • Taxes: $717
  • Living Money: $352
What My Strategy Is
I have worked hard to document my strategy for this year. To read the full article of how and why I am planning to front load the year, you can click the link above. 
 
The goal remains to max out my retirement accounts by the end of next month. This will then dramatically increase my paycheck for the rest of the year and allow me to invest more aggressively.
 
Don’t Forget To Automate
One of the keys to my strategy is automation. What do I mean by automation? Here are two ways I automate my investments each month.
 
First, I set up automatic deposits for my 401k and HSA contributions. For me, I set this up through benefits with my employer. We have a landing page I can go to and can update the percentage of my check to contribute to each of these accounts. I do this for one reason and one reason only. When automating this way, I no longer see that money in my bank account. This money will go directly to my retirement accounts and I don’t have to do anything on my end.
 
Second, I set up automatic investments every week in my Vanguard account. This money is transferred on pay day as well so I end up temporarily seeing the money in my account. Again, the goal is to automate things so I have less things on my end that I need to do.
 
Executing this strategy allows me to live paycheck to paycheck in an effective manner. The less money I see in my bank account, the less money I will end up spending.
Key Takeaways: 
  • Front loading your retirement accounts is one of many strategies you can utilize for saving
  • Don’t forget to automate your investment strategy. The less you see in your bank account, the easier it will be. 
  • The cool thing about front loading is what my paychecks will look like after my retirement accounts are maxed out!

Don’t forget @TheYoungRetireeBy33’s 3 Core Principles:

1 – Your money should make money for you⠀⠀⠀⠀⠀⠀⠀⠀⠀
2 – Start early to realize the power of compound interest⠀⠀⠀⠀⠀⠀⠀⠀⠀
3 – Eliminate your largest expense by house hacking