How can you pay yourself first when creditors are calling for their payments or you use your entire paycheck for necessities before the following payday?  Try one of the following methods to ensure you pay yourself first:

401K Plan: If you are lucky enough to work for an employer that offers a 401K plan, you absolutely must take advantage of it!  In some cases, the employer will match all or a percentage of what you put in, which is free money.  Even if your employer doesn’t match your contributions, the benefits of a 401K plan include automatic deposits- before you even get your paycheck the amount you specify is placed into your 401K plan.  Even if you use every last penny of your check now; you would get used to the slight reduction in your check if it was taken out before you even got your hands on it.  Best of all, the money you contribute into your 401K is taken before your taxes are paid.

Automatic Savings Account: If you don’t have a 401K plan option, you can create the same type of automatic-deposit situation with a savings account.  Look for one with high interest- many online savings accounts offer higher interest rates than your local bank.  Every week, set it up so a specific amount of money is taken from your checking account (or wherever you deposit your paycheck) and placed immediately and automatically into your savings account.  The idea is- if you don’t see it, you won’t miss it.  It is much more difficult to physically make a savings account deposit every week if you have to do it manually.  Also, to reduce the temptation to withdraw money from your savings account, don’t have it connected to another account and don’t get an ATM card for the account.

It’s not important how much you save at this time, only that you get into the habit of saving every week (or bi-weekly if you’re paid every other week).  After you get used to it, you can slowly increase the amount you “pay yourself”.

Pay Yourself Before Everything Else was created by and is property of American Consumer News.

Increase Contributions Each Year

One of the primary benefits of automatic 401(k) plans is the ability to increase the amount of your contributions each year – connected with your annual salary increase, for example. When you increase the percentage of money you contribute when you receive a raise, you won’t ever see the extra money in your take-home pay, and will never miss it.

In addition to contributing more to the plan over time, larger contributions will also reduce your tax liability, which is helpful as your earnings increase.

Professional Finance Advice

The automatic 401(k) option includes investment advice, typically with computer-generated portfolio, managed accounts, or target-date retirement funds. Some employers bring in financial advisors for employees at various times of the year, at no charge to the employee as an added benefit. It’s definitely a feature you’ll want to take advantage of, since seeing a personal finance advisor on your own can be expensive.

Disadvantages of Automatic 401(k) Plans

Despite a number of advantages of auto saving plans, there are some disadvantages as well. If employers set the initial savings percentages of 3% of each employees salary, some employees may just accept that and they may be able to (and should) save more as it’s recommended that individuals set aside 15% of their gross income (including any employer matching contributions) for retirement.

Additionally, many of the automatic plans will place employees into pre-selected investments- which may not be a bad thing though! Between 2002 and 2006, John Hancock compared employees who selected their own investments with those who invested in pre-selected plans, and found that after 5 years – the employees who selected their own plans would have been better off if they had been in the single life-cycle fund, instead.

Automate Savings With Automatic 401(k) Plans was created by and is property of American Consumer News.

Use Direct Deposit – Utilizing the direct deposit service to deposit your payroll will help keep you from spending the cash in your hand. It makes sense to utilize direct deposit also to help you save money. Most payroll departments can help you set up a plan to have a certain amount of money deposited directly into a savings account so you can start saving on a continual basis.

401K Contribution – If your company offers a retirement plan, make sure you are putting as much into as you can afford, especially if the company matches your contribution. The money you put in is pretax money so your salary will be hit with less taxes.

Readjust your Withholdings – if you have consistently received a income tax refund, you are not working with the correct withholding numbers. Make sure you are paying in just enough to keep you from getting hit with a tax bill at the end of the year. The money you are overpaying to the government can add up fast and help expand our budget or add to your savings. This readjustment is especially important to remember if you get a raise or have another change in your financial situation. Double check your numbers after filing for the changes to make sure they have been processed.

Reevaluate your Health Insurance – Those who have been at their jobs for a significant period of time often do not take the time or remember to check in with their health care plan. Go over the coverage you have and the amount you are paying then check with your human resource department to discuss alternative plans that may fit your needs but be less expensive. Also, make sure you have the best insurance plan for your family. Perhaps your spouse’s new job offers a better program at better rates and it may be worthwhile to switch to the new plan.

Check Out All of the Company Benefits – Depending on the size of your company and the policies they keep, many offer benefits that go unused simply because people do not know they exist. Take time to read through the company manual or your own employment contract and see what is actually available to company employees. Take advantage of employer-reimbursed tuition, group insurance plans, stock discounts, and other benefits often overlooked.

Request Reimbursements - Companies that offer allowances, especially for travel, often provide additional money to cover the cost of travel. However, this money is added to your income and is therefore taxed. Instead, opt for a reimbursement check for mileage or other travel costs that will not be subjected to additional taxes.

Use Raises/Bonuses Wisely – Whatever percentage raise you earn, increase your contribution to your savings account and your 401k account by the same amount. Since you haven’t been used to having the extra money, you won’t miss it if you direct it away immediately.

How to Get the Most Money Out of Your Paycheck was created by and is property of American Consumer News.

1.  It’s never to late too start, but start as early as possible!
If you start early in your life, your money will have more time to grow.  Each year your interest gains will be based on the previous year- which is what we call “compounding”.

2.  Use your company 401K plan if you have one.
Contributing money to 401K plans gives you a tax deduction, not to mention tax-deferred growth on the money you put there.  Many employers offer some kind of matching- whether they match 100% of your contributions or a smaller percentage- that’s free money.

3.  Be realistic with goals.
How do you want to live when you are retired?  How much will that lifestyle cost you?  With that in mind, determine how much money you’ll need to supplement your social security, 401k and other sources of retirement income and then put that amount into your budget for saving.

4.  Consider IRA’s
An IRA offers tax advantages.  Traditional IRA’s give contributors tax deferred growth (you only pay tax on the money when you actually withdraw it) while a Roth IRA offers tax free growth but doesn’t allow for any deductible contributions.

5.  Invest in Stocks over the long term.
Over a long period of time, stocks are among your best opportunities for achieving high returns.

6.  Have a diversified portfolio
The best investors are those who “diversify”.  Have a good mix of stocks, bonds, savings accounts, cd’s and other investment vehicles to ensure you are getting the best gains possible while minimizing your risk.
7.  make smaller withdrawals upon retirement to stretch out your money.
When you retire, don’t pull out all of your saved money all at once.  Instead, take out money from your taxable accounts first and allow the tax-advantage accounts that you have to continue to compound and grow for as long as possible. 
8. Consider a part time job.
You’ve probably seen many retired aged individuals working part time in places like Walmart as greeters. Not only does working help you reduce the amount of money you need in your savings for retirement, but it gives you socializing opportunities you may not otherwise have.
9.  Stretch it out!
When you retire, you can stretch out your assets by moving to an area with a lower cost of living, or making modifications to your lifestyle.

Retirement Planning Basics: Things Ain’t What They Used To Be was created by and is property of American Consumer News.