You might have noticed a bunch of A-Ha moments floating around last week as Shannon rocked her Financial Literacy Awareness project. But in typical J. Money fashion, I missed the boat so I’m blabbering about mine today :) And big shock – it has to do with my 401(k) account. (But I promise not to harp on it as much as I did last week, since I’m only permitted one harping per month).
Consider today’s post mainly about ACCUMULATION. It happens to use the vehicle of a 401(k) account, but keep your eyes glued strongly to the money parts of the article vs the tool. It’s the process of your cash growing over time that’s the important part here.
And it all started when…
J. Money’s balance doesn’t go down
A long long time ago, before the invention of blogs and twitter and even RateMyFace.com (okay, well not that long ago ;)), J’s father
once multiple times told him that if there was just one financial thing he needed to do when he got his first “real” job, it was to invest in his 401(k) plan. “At least to the amount your employer will match” – he added over and over again. To which J. Money didn’t listen over and over again like a big fat dummy, until one day he wised up and gave in.
Every two weeks going forward, he’d see his anemic account get a little fatter and fatter – without ever missing any of that money, mind you – until one day he woke up and SHABAM! He had over $1,000 in there! “Woahhhh $1,000! For almost doing nothing! I’m so rich!” – said an eager 20-something bachelor, realizing he was onto something incredibly magical.
It had been the first time any of his accounts didn’t go DOWN after being pumped full with a paycheck. An alluring feeling indeed, especially from someone so used to playing the Transfer Game at the end of every month (you know, when you don’t budget right and you have to keep xfering money from your savings back into your checking?)
“You mean to tell me I just leave it be, and over time it’ll keep going up? Until I’m old and gray and able to finally tap it in retirement?” J cautiously asked his father? “You got it… And who you calling old?” dad quipped back.
And true indeed, the money kept rising, and rising, and rising – without ever lifting a finger. Except to increase the %’s over time to smartly avoid lifestyle inflation.
The Rise of The Monies…
A couple of years later his balance hits $10,000 – “Holy shit! Do you know how many beers I can buy with that?” – this same bachelor exclaimed after a while of not checking.
Then a couple years after that, $25,000 – “Holy balls! This puppy’s growing!” – our same bachelor, now trying to curb his cursing whispers to his long-term girlfriend who will soon be ex-girlfriend (oops).
Then $50,000 – “Rollin’ rollin’ rollin’….. keep them doggies rollin’!” – he shares with his new girlfriend, soon-to-be fiancée and mother of his future children.
Then it soars to $100,000 a little after that, having fully maxed out his 401(k) yearly realizing this would snowball the pot even faster! – “YES!! This is getting too easy!” – he exclaims to the L.A. Times, and his now bride to be.
And, finally it reaches $180,000. When our bachelor turned husband, turned future father, leaps to self-employment and shouts, “Boooooooo…. I’m not gotta get any of that free money anymore!!!” as he xfers out his 401(k) into Traditional IRA accounts and starts his ridiculous IRA test. Which he’s soon ending and rolling over to Vanguard to be a pimp like thousands (millions?) of other ballers wanting low fees and not trying to time the market (post on this coming soon)…
And J. money and his money live happily ever after… while both his family, and his net worth, continue to grow after realizing the power of never ever touching your money! A simple concept a 3 year old could master, yet it takes this guy 20-some years for it to finally sink in. Where he continues on the legacy by maxing out his Roth and SEP Iras every year going forward…
The moral of the
- Your stash can only grow once it’s *started*. SO START IT NOW no matter what stage or age you’re at! It doesn’t have to be via 401(k) either, put it wherever you want as long as you KEEP DOING IT.
- Automate it and make it easy while you’re out living your life. (And increase your savings rate as new money finds you over time to avoid that bitchy lifestyle inflation)
- Never poke your grubby little hands in the pot!! It’ll continue to grow as long as you stay far far away and never take any out. I promise.
And lastly, always listen to your parents :) If they’re no good with money, then always listen to me.
// End A-Ha Moment
You can see other bloggers’ A-Ha moments here, courtesy of Shannon from The Heavy Purse.
[Photo by reynermedia]
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!