Earlier this week I posted my review of Charles Duhigg’s wonderful self-help book on ‘The Power of Habit’. Duhigg explores how we form habits and what it takes to break those bad habits and form new, good habits.
“As people strengthened their willpower muscles in one part of their lives—in the gym, or a money management program—that strength spilled over into what they ate or how hard they worked. Once willpower became stronger, it touched everything.”
Like virtually all books I read these days, I instantly go to how this came help me financially and help me with my personal finances. Over the last couple of years I have gotten into the “habit” of saving aggressively for retirement and budgeting so I ensure I live within my means. In 2015 I increased my 401k savings and upped my emergency fund. In 2016 my wife and I both maxed out our Roth IRA’s and I again increased my work-sponsored 401k plan.
It became a game for us to challenge ourselves to save more and more. It became a habit and we kept pushing ourselves to save more. We knew the more we could save at an early age, the better our chances are at retiring early. We kept learning how to live on less money each month so that we could continue to allocate more towards savings and retirement.
In 2017 I again increased my 401k savings to 12% of my income. We both plan on maxing out our Roth IRA’s. We’ve even discussed the potential of maxing out my work 401k plan, which would be $18,000. I don’t think we’ll get there this year or even next year, but still, if I can max out my 401k before the age of 35 we’d be in a great spot at eventually retiring early (age 55). We’re expecting our first child very soon and plan on starting to save for college ASAP via a 529 plan. So the new, added expense of a child makes maxing out my 401k a bit challenging for now. We’re going to see how our budget changes with a child to now care for and raise, then go from there. Diapers and college, here we come!