Apart from doing my taxes, my favorite thing about this time of year is the smug and self-congratulatory feeling I get from maxing out my 401(k). No doubt I am a little nutty about retirement savings, and I feel very lucky and grateful to be in a position where I (1) have a 401(k) and (2) have the ability and wherewithal to max it out.
To be sure I don’t take that luck and gratitude for granted, I take it to a bit of an extreme. I make a point to max out my 401(k) as early in the year as possible, a habit I started when I began my “real” (cough cough) career in 2007. At that time, my employer would allow contributions of up to 50% of my paycheck, so that’s what I did. My current employer does not cap contributions, so I’ve opted to contribute 100% of any bonuses and 50% of my salary.
Whaaaaa? Why do I do this?
- I’m impatient. This way I’m done with my 401(k) contributions by summer, so I can rest easy by the lake.
- I’m greedy (when it comes to savings). Contributing such a high percentage of my income forces me into a greater than 50% savings rate, a habit I (mostly) maintain even once I’m done so that I can keep barreling towards FIRE.
- I like getting a 50% raise several months into the year, every single year. Ok, it’s not a raise, exactly, but having a little more cash on hand for the rest of the year can come in handy. I don’t increase my day-to-day spending after my 401(k) contributions are done, but it’s nice to have a cushion for summer home improvement projects and travel.
- I believe in investing early. To put it eloquently, markets go up over time, so the more time your money has to go up, the more up it goes. There are different philosophies about investing lump sums at once v. dollar-cost-averaging (investing the same amount over a longer period of time to average-out market fluctuations) and there is no question both methods work well. I dollar-cost-average my non-retirement investments by automatically investing a certain amount with every paycheck (an amount that goes up once my 401(k) is done!), but for long-term retirement savings, the earlier in the better. (If in doubt, check out this calculator.)
- I can put my FU money to use guilt-free. On days when I’m feeling like I should just walk away from my job, one thought that holds me back is failing to take advantage of my great 401(k) plan. If I can max it out early in the year, that restriction evaporates into several months of potential no-strings-attached freedom.
So what’s the first thing I do when I’m done with my 401(k)? Max out my Roth IRA, which I’m pretty sure stands for I’m Really Anxious about retirement.
It’s been about four months since I started my capsule wardrobe experiment. I’ve gotten a lot of questions, such as how do I decide what clothes to keep? How do I decide what new clothes to buy? Don’t I get bored? Happily, there are an equal number of questions I have not asked myself over the last few months, such as what should I wear today? How do I have so much stuff in my closet yet nothing to wear? Where the @%$# are my favorite pants?
Based on this last bit if nothing else, I am calling the capsule experiment a tremendous success. Continue reading Capsule Re-Cap(sule): How my New Wardrobe is Going
As an aspiring professional athlete,* one of my favorite kinds of stories is the kind of story about professional athletes who do amazing things with all their professional athlete money. Amazing things like completely ignoring it.
Last year, my favorite story was about Daniel Norris, an MLB (that’s baseball, goofball) pitcher who lives in a van. A van!
This year, hands down, the best thing to come out of the NFL (football!) is from my neck of the woods, now retired and truly FIREd** Seahawk Marshawn Lynch. Apparently he never spent any of his NFL salary and instead lived off side gigs like product endorsements and saved money through standard frugal favorites like avoiding fines by performing at press conferences.
So now he’s retiring at age 29 with a cool $50 million in the bank. Assuming a conservative 4% withdrawal rate, that leaves him $2 million per year to live on without ever touching his principal or earning another penny. That’s a lot of Skittles!
I’m hoping to do something similar, though maybe on a smaller scale (?). Just as soon as my product endorsement checks start rolling in . . .
*I am not an aspiring professional athlete.
**FIRE = Financially Independent / Retired Early. Not “fired” as in terminated from employment. Duh. Nobody would fire Marshawn! Sad to see him go, but I support his decision 12,000% and wish him nothing but the best. And I really hope he reads this post.
Lots to cover in this one:
- $27.39 – TJ Maxx – a new handbag, after the number of holes in my old one finally became intolerable. I was hoping to wait and find a higher-quality, more “perfect” one, but alas. I used it up, wore it out, and made it do … until it didn’t.
- $52.80 – Amazon – shower chair (who’s old!) for an upcoming infirmity
- $37.60 – Chevron – gas
- $80 – Christmas Tree (also a fundraiser supporting a local HIV testing and support center)
- $9.99 – Trader Joe’s – holiday wreath to brighten my basement rental
- $46.49 – Target – two new guest pillows to replace those that now live in my basement, a new body pillow for sleeping, and Oxy Clean laundry powder
- $68.80 – Superfeet – two pairs of insoles after finally accepting my others (5+ years old) no longer give me the support I need
- $23.29 – Lowe’s – a large board and supplies for a new Ikea-hack “built in” bookcase and media center for my living room (more on this to come!)
- $167.49 – Ikea – Three Billy bookcases to make a new media center
- $59.95 – Footsmart – A fancy pants pair of Keen winter slippers with heavy duty soles. I am going to take good care of these and will only wear them inside and never, ever for walking Cheddar Pup.
Total — $573.80
I don’t typically include gifts in this list, but since it’s the holiday season, I’ll include a Spending Roundup Special Edition for gifts in December:
- $355 – cash bonuses to a few of the people who help me and deserve a special holiday thank you (support staff at work, Cheddar Pup caretakers, my monthly housekeeper, and yard service)
- $78.13 – gifts for Sweetie Pie and Roommie Pie (not including a gift of future cake-and-pie baking for Sweetie Pie, which Roommie Pie and I will certainly benefit from as well)
- $55.62 – supplies for homemade organic vanilla extract, which resulted in holiday and hostess gifts for 20 friends
- $158.22 – gifts for my family (mom, dad, sister, nephew, close friends)
- For wrapping, I still have a huge roll of paper and ribbon left from last year that I got at Ikea. I am not sure how much it cost, but not more than a few dollars. I like it in part because it’s plain red striped so I can use it for a variety of occasions, not just Christmas. I also used some existing cardstock and art supplies for tags, labels, and gift certificates.
Holiday Gifts Total — 646.97. Frugal? I hate even asking this question … I’m happy giving each and every one of these and I think/hope I found things that the recipients will use and appreciate. I love giving gifts and so this is always a fun time of year for me.
Don’t you just hate winter? It’s cold and dark and the holidays are the WORST. I hate spending so much money and my family drives me crazy!
Au contraire, my friend, I love this time of year — here in the Northwest, it’s cold, rainy, wet, and glorious. From Halloween to New Year’s Day, I get such a warm and cozy feeling from the food, the cheer, and spending time with people I love. Sure, there are occasional holiday stresses, but for the most part, I’ve found a good balance of being able to make time for myself, celebrate with loved ones in ways that don’t feel forced, and frugalize my gift giving in ways that don’t detract from the generous spirit of the season. I get along with my and Sweetie Pie’s families, find a strange amount of joy in decorating my Christmas tree, and love the extra snuggle time I get with Cheddar Pup. And there is nothing like a good cup of tea with a Youtube Yule Log.
I hope you all find similar warmth in your holiday celebrations wherever they may take you! Thanks for reading and for encouraging me to keep up with this blog. It’s been a fun year.