The Annual Raise

Do you get an annual raise from your employer?

If yes, listen up.  There is a way to allow that 2, 3 or 4% your employer gives you to add enormous amounts of wealth to your pocket.

There is a thing called lifestyle inflation which ultimately means the more you make the more you spend.  It is human nature for us to increase our standard of living as our income goes up.  For instance, when I was in college, I rarely went out for a nice sit down meal.  Now, I go a few times a month.  Lifestyle inflation is bound to happen to a certain degree.  You make more money, you start a family.  You start a family, you need a bigger house.  It isn’t a perfect cause and effect relationship but you get the gist.

So what are you doing with your annual raise this year?  If you are like most employees then you get a tiny piece of satisfaction out of seeing a slight bump in your paycheck.  Not like an extra $30, $50 or $70 a paycheck makes a huge difference, but it can if it is put in the right place.

Let’s say you are the recipient of a 3% annual raise from your employer.  Instead of letting the raise go straight into your paycheck take 2% of that raise and increase your 401k contribution by 2%.  Then let the 1% add a little more to your paycheck.  Now on an individual with a $50,000 a year salary, increasing your 401k contribution by 2% is only $1000.  However, if you let that money compound and you continue to put your raise into your 401k each year, then over time it can add up to thousands if not hundreds of thousands of dollars.

Nobody ever looks back and says “I saved too much money.”  So give it a shot, and let the savings pile up.

Budget Smart, Invest Wise

9 Financial Commandments for 20 Year Olds

Getting your finances off to a stellar start is easier said than done.  It is critical if you want to begin on the right side of the financial track.  I’ve discussed many of these commandments in previous posts; however, Kathleen Elkins from Business Insider lays out just what you need to do to take control of your finances early in your working career.

Try and see how all nine apply in your current life.  Don’t feel obligated to make a move on all of them at once.  Create a plan.  Tackle one of these commandments a month.  If you follow that plan you will be ready to start 2016 with a great financial outlook.

http://www.businessinsider.com/worst-money-mistakes-millennials-2015-6

Budget Smart, Invest Wise

Constant Investing

In case you missed it the DOW jumped 236 points yesterday.  The S&P was also up over 1% yesterday.  Before yesterday’s rebound the market had pulled back approximately 2.5%.

While these numbers might seem minuscule in the big picture of things, there is an important message to take from this.

The market moves every day.  Sometimes by a little, and sometimes by a lot.  If you take the emotion out of your investing the daily, weekly or even monthly moves of the market shouldn’t be an issue to your portfolio.

The Key…

Constant investing!

Every Friday I put a $100 deposit into my brokerage account.  Every month I put $500 into my Roth IRA.  By investing on a constant schedule I can ensure myself DCA (Dollar Cost Averaging).  By doing this, when the market goes up I am investing the same amount as I would when the market goes down.  The only difference is that when the market is down for the week or month, I buy more shares of the mutual fund.

By sticking to my investment plan and constantly investing, I have little care for how the market swings each day, week or month.  Timing the market is never a good idea.  Very few have the ability to beat the market.

My advice: Keep it simple.  Constantly invest the same amount each month into a mutual fund, stock, etc.  Allow compound interest to accrue.  Give it time.

Budget Smart, Invest Wise

Budgeting for a Summer Trip

sunset

It’s June, and summer is upon us.  Not officially, but close enough.  Vacationing during the summer is commonplace.  But what is the best way to budget for that summer trip?

I have a travel category in my budget every month.  Let’s say I allot $150 a month for trips throughout the year.  That gives me a yearly total of $1800 for trips.  Depending on where I decide to go, I try and budget a trip for $900.  This means I can take 2 vacations during the year.  Again this is amount is allotted for just 1 individual.  If you have a family of four you will have to make other arrangements.

I like to go on cruises, to the beach, this summer I am heading to New York City.  Taking a little out of my budget every month allows me to properly plan for my vacation.  The alternative would be to take a huge hit during the month you do decide to travel.

I always make savings my first priority, but I do take time to enjoy the fruits of my labor.  Hard work should be rewarded.  I’ve heard many times how employees let vacation days go unused, a problem I won’t let myself ever have.  There are many ways to budget for a trip or summer vacation.  I just let you know how I get it done.

Budget Smart, Invest Wise