When your paycheck hits your bank account, it might not look like much. No matter the size, if you spend less, you’ll have more to save and invest.
Federal, State, Social Security and Medicare taxes are taken out, too. Medical, dental and vision insurance and your 401(k) contribution are withdrawn before you even see your check.
Automatic deductions such as your Employee Stock Purchase Plan, car payment and transfer to savings hit, too. Your net pay looks a lot different than your gross pay. Don’t let that fool you though.
Let’s face it. A lot of money flows through your hands during your lifetime.
When you look at one single net paycheck, your income stream might look small but when you look at how much money you make over your lifetime, it’s astounding.
For example, if you make $50,000 and get a 3% raise each year, even if you never get a bonus or promotion, you’ll make $3.7 million dollars over your lifetime!
Even if you are at the tail end of your career, you’ll still make a lot of money. For example, if you have ten years left to work and make $100K per year, you’ll make another million dollars before you retire. If you get a 3% raise each year, you’d have made $1.15M those last 10 years of your career.
The key is to keep some of that money and make it work for you. Check out this Lifetime Income Calculator and see how much you’ll make during your career.
Take action: Here are five ways to spend less and invest more:
1. Automate your investments. Bump up your 401(k) by 1%.
2. Save more. Start a Roth IRA (if you qualify)
3. Carve out money to save. Set up an automatic transfer from checking to savings or an investment account (timed to hit on payday)
4. Use your employee benefits to the max. Enroll in your employee stock purchase plan at work
If you need to, change your mindset. Tell yourself:
I make a lot of money, I’m going to make the most of it.