Automatic Millionaire Plan
David Bach is one of my favorite financial book authors and I read Automatic Millionaire about 2 years ago and augmented my plan to make everything more "automatic". The principles are very simple and if you can stick with the plan, you'll see your nest egg grow virtually painless! I was pleasantly surprised when I saw how some of my investments/savings have grown and hope that someone else can benefit from the plan. Here's what I do:
- 401K: I started contributing to a company 401K plan when I was 22, unfortunately, I suffered massive losses when my old company became synonomous with one of the largest corporate scandals (MCI). I currently max out the contribution, but I work for a small company that doesn't offer a match. If you can't manage maxing it out, at least contribute to the point of company match.
- Investment account: During the internet hayday, I tried the whole "I-can-be-my-own-stock-broker" plan and yeah, suffice to say I didn't do so well. A valuable lesson I learned from all that is -- let the pros handle it! Please open your account with a reputable brokerage firm (I use Smith Barney) and have a financial advisor do a investment analysis for you. I did just this, bought a few mutual funds that my advisor recommended and have not had to think about all this. Now, if you can deal with the constant highs and lows managing your own stocks, go for it, but I don't have that kind of time or stomach for it. For this account, I automatically have $150 deducted from my bank account each month. I time the auto deduction to happen right on payday, so I don't miss it!
- Roth IRA: I contribute to a Roth too since it's tax-free withdrawals after retirement. Try to start with even just $50 - $100/month.
- High-Yield Savings: I highly recommend opening a high-yield savings account, such as the one offered by HSBC bank at 4.80% APY! That's the highest I've seen, and there's no minimum and no fees! I set up an automatic transfer on the first of every month.
I did all of the above and now I've got a nice nest egg stashed away. Don't wait on this, the power of compounding astonished me and I wish I had started even sooner. I know you might think that with your bills, etc. that it is impossible to do this, but trust me you can. Bach says, "pay yourself first". Allocate whatever you can into a savings/retirement/investment account, then worry about your bills, etc. Another trap we tend to fall into (and yes, I've been a victim to this) is that with every raise, promotion, etc. We tend to end up spending a lot more. Try to at least save 50% of your increase or try living off your old salary. Next thing you know you're off to a nice, relaxing retirement. :)
- 401K: I started contributing to a company 401K plan when I was 22, unfortunately, I suffered massive losses when my old company became synonomous with one of the largest corporate scandals (MCI). I currently max out the contribution, but I work for a small company that doesn't offer a match. If you can't manage maxing it out, at least contribute to the point of company match.
- Investment account: During the internet hayday, I tried the whole "I-can-be-my-own-stock-broker" plan and yeah, suffice to say I didn't do so well. A valuable lesson I learned from all that is -- let the pros handle it! Please open your account with a reputable brokerage firm (I use Smith Barney) and have a financial advisor do a investment analysis for you. I did just this, bought a few mutual funds that my advisor recommended and have not had to think about all this. Now, if you can deal with the constant highs and lows managing your own stocks, go for it, but I don't have that kind of time or stomach for it. For this account, I automatically have $150 deducted from my bank account each month. I time the auto deduction to happen right on payday, so I don't miss it!
- Roth IRA: I contribute to a Roth too since it's tax-free withdrawals after retirement. Try to start with even just $50 - $100/month.
- High-Yield Savings: I highly recommend opening a high-yield savings account, such as the one offered by HSBC bank at 4.80% APY! That's the highest I've seen, and there's no minimum and no fees! I set up an automatic transfer on the first of every month.
I did all of the above and now I've got a nice nest egg stashed away. Don't wait on this, the power of compounding astonished me and I wish I had started even sooner. I know you might think that with your bills, etc. that it is impossible to do this, but trust me you can. Bach says, "pay yourself first". Allocate whatever you can into a savings/retirement/investment account, then worry about your bills, etc. Another trap we tend to fall into (and yes, I've been a victim to this) is that with every raise, promotion, etc. We tend to end up spending a lot more. Try to at least save 50% of your increase or try living off your old salary. Next thing you know you're off to a nice, relaxing retirement. :)
posted by techfashionista @ 9:18 PM
1 Comments:
At 8:19 PM,
Unknown said…
There isn't a minimum required deposit per month for the Roth IRA? Is there a site where I can read more about this?
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