The sky is falling, the sky is falling, Chicken Little described. That is exactly how the world is looking like these days. The market is up one day and crashing the next. What are we to do? I’ve been in finance for fifteen years and I remember being a naïve eighteen-year-old, working as a teller and through the housing crash of 2008. People would come into the bank and tell me how they just lost fifty thousand in their 401K practically overnight. I would just nod in agreement and say, “man I can’t believe that”. To be honest, I didn’t! I had a couple of hundred dollars in my account so I couldn’t imagine someone having fifty thousand, let alone fifty thousand to lose.
Throughout my time in finance my naiveness has gone away and I now know that the richest man’s net worth is in the hundreds of billions while the average American is heck of a lot less. With all the market turmoil once again how do we get to a point where we can secure a brighter future for ourselves and our loved ones?
Sure, we can go with what’s in today and try betting on Crypto and GameStop. But, as we have often learned, trends don’t usually last long. These trends are popular for a short period of time, you hear of this or that person making millions but its never you or someone you actually know. Usually what ends up happening is you invest your hard-earned money one day and it’s gone the next. In the instance that you make a profit you stay in too long hoping to make even more but at the end of the day you end up with a huge ZERO!
So, the question comes up again, what can we do to secure financial independence? Well, did you know that most Americans become millionaires by contributing to their 401K’s? Why is that?
For one, it’s out of sight and out of mind. The contributions are in your 401K before your spending hands can wrap their fingers on them. You are contributing no matter what the market does. Up or down, it doesn’t matter, you continue your tortoise pace and keep on contributing. Any temptation of betting on today’s “fashion” doesn’t even cross your mind because that’s not an option in your 401K.
Also, it doesn’t hurt if your employer is providing you free money in the form of matching contributions. I’ve never met a person who didn’t like free money, but I have seen people not contribute into a matching 401K. If you saw five dollars on the street, would you pick it up? I think we all would, so why aren’t people picking up the free money their employer is providing them?
There are employers out there that don’t offer a 401K, does this mean you won’t become a millionaire? No, not at all. What this means is that you need to find another way to contribute towards your retirement. An IRA, either Traditional or Roth is just the thing you need in cases like this. Today we won’t get into the weeds of things with all the specifics but if your employer does not offer a 401K you desperately need to be contributing into an IRA. Your employer not offering a 401K or offering matching contributions will hurt you, but it shouldn’t handcuff you. You have options!
Can you contribute into an IRA even if you have a 401K? Heck yes!! The more you do today the more you will have tomorrow. There are rules to contributing into 401k’s and IRA’s and you should consult with a professional if you don’t feel confident in doing it yourself.
Remember, if you want to have a brighter future, start planning today. Start with setting up your 401k so you can take advantage of any free money. Then if your budget allows, set up an IRA, contribute as much as you can, or the IRS allows. If you start with these two steps, you are already doing more than your average person living in the U.S.
Start climbing the ladder!