Before we go any further, we should ensure you understand what we mean when we use the term “401K.” A 401K is a kind of investment account that is specifically geared toward your eventual retirement. Most people want to retire from work at some point, and a 401K is a financial tool that should set you up nicely when you’re ready to do that.
Load Error
A 401K is similar to an IRA. However, an IRA is a retirement account you open independently. A 401K is a retirement account you set up through your job.
Some employers allow you to set up a 401K with them. To encourage you to contribute to it from your regular paychecks, they may match your contributions up to a certain point.
Employer Match
One of the best arguments for a 401k is that many employers offer “matching funds” to help fund your 401k.
David E. Barfield, CFP, from Datapoint Financial Planning, LLC, says, “Most 401Ks today come with some type of matching contribution from the employer. Increasingly, employers are implementing “safe harbor” 401Ks so that the owners and executives are allowed to make maximum contributions. Therefore, vesting is often immediate, and matching is typically fairly generous. For example, a common safe-harbor match would be 100% of the first 3% and then 50% of the next 2%. That means that if an employee contributes 5%, the company will give them 4%. That’s an 80% match on the first 5% contributed by the employee. 401Ks are notorious for “not so great” actively managed investment options with high expense ratios; however, a match of 80 cents on every dollar up to 5% of your salary can make up for the subpar investment options.”
Jonathon Bird, CFP, CWS, Farnam Financial, warn employees who are taking advantage of their company’s matching to “Be aware of your company’s matching schedule. Sometimes if you front-load your contributions in the first half of the year, your employer won’t provide matching contributions in the second half of the year.”
Don’t Overutilize
Christopher Berry, JD, CFP from Castle Wealth Group, cautions against using the 401K too much. He says, “I am always a fan of contributing to a 401k, at least to the employer match. That’s free money. Always take the free money; it’s the best money. However, I would look to contribute to a Roth 401k if it is available. Too often, as I sit down with soon-to-retire families, they have way too much pre-tax money in their 401ks. As they approach retirement, they have this huge tax issue. So, I would say always contribute to a 401k up to the match. Try to do it in a Roth 401k if available. If a Roth 401k is available, contribute as much as possible. If only a traditional 401k is available, contribute to the match, then maybe look at other saving options.”
10 Best Money-Saving Tips People Learned By Being Frugal – A Dime Saved
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What are the best-money saving tips people have learned by being frugal? After a recent internet poll, here are the top-ten voted frugality tips for saving money.
Buy Second Hand
“If I can wash it, I’ll buy almost anything secondhand. It’s my go-to for clothes, furniture, crockery, cutlery, linen, décor, and, sometimes, appliances and gifts. Only underwear and swimwear are exempt from my secondhand habit,” one confessed.
Keep a Routine
“Having a routine helps with staying frugal. For example, if I know I’m generally at home, seeing friends, buying groceries, exercising or whatever at a particular time on a specific day, my stress is lower, and I’m less likely to buy on impulse,” one stated.
Dispose of the Disposable
“Eliminate disposables and switch to reusables for as many things as possible. It’s amazing how much money you can spend on things you throw away,” one explained. “I use reusable dishcloths, cloth napkins, dryer balls, water bottles, rags, real plates and forks, reusable zip lock bags and containers, and dusters.”
Keep It Until It Breaks
“Only replace something that is broken and no longer continues to function for the purpose intended, to a degree, of course. Also, always attempt to fix before replacing if possible,” one replied. Another added, “With YouTube, there’s almost no reason not to try to repair the smaller things.”
Start From Scratch
One user noted, “Making things from scratch is often cheaper and healthier than pre-made food. Soups, rice, lentils, beans, and pasta are some of the best ways to stretch food further. Creativity and a few good spices can go a long way.”
Difference Between Want and Need
“Learning between a want and a need. Just because it’s on sale doesn’t make it a need. For things around the house, I will buy a cheaper version and use it until I save up for the version that will last a lifetime, like a Kitchen Aid mixer,” answered another.
Choose the Cheaper Route When Possible
Someone suggested, “Any household items you can stand slumming it with… buy at Dollar Tree. Of course, they cost $1.25 now, but it’s still a great deal. Examples: Windex, hand soap, liquid plumber, hand sanitizer, wipes, toothpaste, etc.”
Don’t Just Buy the Sale
“Buy what you use and use what you buy. I have a cousin who tends to buy groceries just because an item is on sale, then tries it and realizes she or her kids hates it,” shared one.
“With her doing this, she has several things in her fridge, freezer, or pantry, taking up space that no one will use. She has wasted money and space on an item she thought was a good buy because it was on sale.”
Download the Apps
“Technology has come a long way and now offers us many ways to save money. Use this to your money-saving advantage. For example, some apps save you on gas, groceries, and travel, and even can earn you a bit of extra rainy day money,” a final user commented.
Related: How To Get Cashback on Purchases
What do you think? Did Reddit get this right, or is your favorite frugal tip missing from this list?
More From A Dime Saved:
10 Things That Are 100% A Scam but Accepted in Society
Americans Are Moving to These States in Droves To Save Money
10 Greatest Tips for Living as Cheap as Possible
11/11 SLIDES
Remember the Purpose
The important thing to remember about a 401k is that it is money specific for retirement. Barfield says that many of the frustrations with a 401k come from forgetting its purpose.
“Some of the arguments against a 401K involve the lack of access to the money and penalties involved if withdrawing prior to age 59 ½” he says, “A properly funded emergency fund can alleviate much of that anxiety around tying up the money, and the fact that it is tied up makes it more of a pro in my opinion. The money is for RETIREMENT. Most of us with reach “retirement” at some point. That word may mean different things to different people, but if you want financial freedom, you have to save for it…for the long term. A 401K is a great tool for that.”
Read More Articles From A Dime Saved:
Get Rich Quick (Well, Eventually): 20 Basic Rules for Financial Success – A Dime Saved
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Want to achieve financial success?
Being financially successful is a goal for many, yet achieved by few. However, planning for and ultimately achieving financial success is not a simple feat for many.
How To Be Truly Financially Successful
There are many things you need to do to be truly financially successful. Therefore, I have created what I think are the twenty most basic rules for anyone who is looking for financial success (which should be everyone).
Achieving and maintaining financial success can be difficult. There is no one size fits all approach that will work for everyone. Instead, you need to take the time to figure out what works best for you individually. However, these basic rules will be the most effective way to start.
Have a Budget and Stick To It
The absolute first thing you have to do when taking control of your finances is to make a budget. That’s right- a BUDGET. You need a personal budget. You need one written down. Not only that- but it needs to be a budget that WORKS. A budget only deals with the money you have and not the money you think you have or the money you wish to have.
Related: How to Make A Budget That Works
Have a Good Savings Plan
To have money, you need to save money. Therefore, you need to have a savings plan in place. A savings plan means that every single paycheck, you put money aside for savings. Putting money aside should be a number one priority to achieve financial success.
The first thing you need to do is have an emergency savings fund. Start with building an emergency fund and then move on to a retirement savings plan. If your work offers a retirement savings match, make sure to take full advantage!
If you have trouble saving money, join the $1,000 Savings challenge now!
Make Extra Money
To be financially successful, you need to make money. There is no way around it. If you aren’t making enough money, you need to make more. You can do this by leveraging your current job (if you have one) and working on getting a raise, switching to another company that will pay you more, or leveling up your skills to be more qualified and move up the corporate ladder.
You can also start a side hustle or do small jobs and hustles to make extra cash on the side. Then, take all this extra money, whether $5 extra or $300 at a time, and put it towards your debt repayment or savings. Doing this will put you straight on the path to financial success.
Related: 15 Real Ways To Make $50 Fast Right Now
Spend Mindfully
Mindful spending is spending money on what you need and what brings you joy and acknowledging that. Mindful spending means taking the time to appreciate where your money is going and what your money is doing for you. Mindful spending allows you to have joy and contentment when spending money wisely.
Mindfulness is one of the best things you can incorporate into your life. This maxim is true with your finances as well. You will be able to control your emotions and make better decisions regarding spending money.
Give Charity
Charitable giving is not just rich people giving away money. Even if you are not well-off or wealthy, you still give money to those who need it. I think giving to charity is one of the most important things you can do with your money. We should be as proud of our giving rate as we are proud of our savings rate!
Money is a tool to better your life and the lives of the people around you. That means you have a moral obligation to help less fortunate people. This obligation involves giving as much charity as you can.
Educate Yourself
Personal finance includes managing a person’s finances; typically, it is about planning your budget and ensuring that you can make payments. It can range from maintaining a balance in your checking account to planning for retirement.
Unfortunately, you don’t necessarily learn these things from school or your parents. If you didn’t, you need to EDUCATE YOURSELF about personal finance. You must know about budgeting, savings, investing, and potential pitfalls. You cannot achieve financial success without knowing. You can read blogs about personal finance or books about budgeting and personal finance to help you get started.
Live a Healthy Life
Not everything is within your control, but living a healthy life will help you achieve financial success. Healthy living segues beautifully into financial success. Eat healthy foods, exercise, drink water, and avoid unhealthy behaviors- these tenets will help you lead a healthy (and better life) and help you pursue financial success.
Take Care of Yourself
There is no point in financial success if you are not in a place to enjoy it. If you don’t take care of yourself, you can’t take care of your money and do good things in the world. So fill your cup up healthily and engage in positive self-care. Being at peace with yourself will help you make positive choices in life and with your money. Get yourself the help you need to help you be successful. If you don’t take care of yourself, then who will?
Live Frugally
There is an inherent value in doing with less, regardless of the amount of money you have. Even if you have a lot, there is value in doing with less, eschewing materialism, reducing your waste as much as possible, and leaving the smallest physical footprint in this world.
There is something good about living a frugal life. Frugal living can be rewarding in many ways. There is something about doing with less, about having less materialism in your life.
Get Advice
Besides educating ourselves, we all need to admit that sometimes we can’t make the best decisions for ourselves objectively. So get advice when you need it. If you have people in your life that can help with this, then by all means- ask and take their advice! Sometimes just talking something out with someone knowledgeable in the area can help you clarify your decision-making. If you don’t have someone to do this for you, hire someone to help you. You don’t have to do this alone!
Start Now
You need to start taking control of your finances and savings NOW. The earlier you start, the better off you are. That’s right- today. You NEED to start saving money and taking care of your finances today.
You need to start saving money now, no matter how old you are- a teenager, a college student, or a young newlywed. If you are older and feel like you have missed the boat- you haven’t. Start taking control today. Don’t push it off until tomorrow.
Educate Others
Educating others is a good thing to do. If you have kids, you are responsible for teaching them about money and finances.
But did you know that teaching others will benefit you as well? When you teach other people, then you are teaching yourself as well. Explaining ideas and concepts to others and engaging in the natural back and forth will help you gain even more clarity.
Your kids will question you, and you will need to answer them- a perfect way to refine your thinking! It will also keep you on your toes! Teaching others makes it harder to slip yourself- it is a built-in accountability system!
Enjoy the Basics
Learning how to enjoy the basics in life will get you far in life. You will save yourself money and be a much happier person. Learn to enjoy the simple things in life. Learn to enjoy easy and simple pleasures and activities.
Allow yourself to fall in love with nature and appreciate the simplicity of a simple life. We have all had to deal with a stripped-down life recently- I, for one, plan to embrace that and enjoy the simpler life.
Train Yourself To Do With Less
Try living with less. Easier said than done, am I right? There are so many luxuries in the world- so many things we can buy and have. Teaching yourself to be satisfied with what you have and making do with less is a healthy way to live.
Needing fewer things will make you happier in the long run. Try to embrace cheap hobbies, frugal activities, and lifestyles- actively work to live with fewer things and needless.
Plan for the Future
I think most people have been in a situation where they need money desperately. Life happens. Life is unpredictable. Things can get crazy. The secure job you thought you had can be gone in a blink of an eye.
That’s why you need savings. The no-risk investment or side hustle can be gone as well. Some people think that they can just cut expenses drastically if required. However, this is neither practical nor easily doable. You need an emergency fund.
Additionally, you may find yourself in a situation where cutting expenses is less than ideal. (Global pandemic, anyone?). While cutting costs is an excellent idea when you can, you need to have a really good savings account. Using a credit card can be great if you need to, but credit card debt can quickly spiral out of control if you are not careful. Putting money away in the bank means having cash when you need it.
Keep On Going
One step forward and ten steps back- sometimes it feels like taking control of your finances and achieving financial success will never happen. Every win is negated by another failure. Life works like that. Keep it going, even if it is not a lot.
Every step you take toward financial success is a step more than if you had done nothing at all. $5 saved is $5 more than $0. Every penny and EVERY DIME SAVED means something. Did you get knocked back? Keep on moving forward, step by step, and dime by dime.
Practice Gratitude
We must be grateful. We must practice being thankful for those things we were blessed with. Happiness should not be taken for granted. Relationships should not be taken for granted. Time should not be taken for granted. Health should not be taken for granted. Financial success should not be taken for granted.
If we are lucky enough to be given those things or blessed with the knowledge that we have to work hard to make those things happen, we need to realize how incredibly privileged we are. We have something that no money can buy. We are the lucky ones.
If you have money, you should spread the wealth- remember you don’t need more to be happy- do your best to share it with others. Giving and sharing make you a better person, and that is something that no money can buy.
Use Extra Money Smartly
Use it smartly when you get extra money, whether it’s from a raise, a stimulus, or working additional jobs. Those bonus amounts go a long way to achieving financial success. Large amounts of money move the needle on your goals and milestones more quickly.
As much as I believe every dime counts (and I do), a million dimes count even more. Use these large amounts smartly.
Celebrate Success
You should celebrate every single step of the journey. Every tiny moment of self-control and success should be recognized and hailed as the victory that it is. You don’t need to have a huge party to celebrate something- acknowledge that you have achieved something tremendous and mark the moment with a ritual or share the victory with others.
No matter how you celebrate, make sure you are working hard to achieve financial success- you should celebrate that!
Invest and Save for Generations
Hopefully, one day we will grow old and then die. Leaving a legacy for generations should be a goal of every successful financial plan. Even if you don’t have children, you can leave a meaningful legacy in many ways—plan for your money to grow and help others.
Let your financial success be the catalyst for others’ financial success as well. Make sure that your financial plan includes planning for the future- even after you are gone.
Financial Success
To be financially successful, everyone must learn how to manage their money wisely. Financial success is hard to achieve. You will not be disappointed if you follow these twenty basic rules for financial success!
Don’t forget to check out 10 Money Rules to Live By!
A Dime Saved
Hi! I am a millennial mom with a passion for personal finance. I have always been “into” personal finance but got inspired to start my blog after a period of extended unemployment. That experience really changed the way I viewed my relationship with money and the importance of accessible personal finance education.
