Week 46: Save More, Tactic 12

What can you do this week?

• If you’re lucky enough to have received a bonus in 2024 or a merit increase next year, use it to build wealth.

• Below are tactics to help you pay yourself by saving more.

Options For Your Year End Bonus Or 2025 Merit Increase:

1. Boost Your Emergency Fund

• Allocate a portion of your bonus or increase to strengthen your emergency savings.

• Aim for 3-6 months of expenses if you haven’t achieved that yet.

• A weekly approach may help you get there using your merit increase.

  

2. Contribute to Retirement Accounts

• Max out your 401(k) or IRA contributions.

• If you've already maxed out, consider opening a Roth IRA or traditional IRA.

  

• Auto-increasing your 401k contributions is a great way to use your merit increase to gradually increase your savings rate.

  

3. Pay Down Debt Strategically

• Focus on high-interest debt like credit cards.

• This reduces financial stress and frees up money for future goals.

• The opportunity cost of carrying debt unnecessarily can be significant.

  

4. Invest for the Future

• Open or add to a brokerage account for long-term investing in index funds, ETFs, or stocks.

• If your investments win, you pay a lower capital gains tax rate potentially.

• If they lose, tax loss harvesting can help your tax situation.

  

5. Start a Sinking Fund

• Save for upcoming large expenses, such as a vacation, car, or home improvements, by setting up a designated savings account.

• Be intentional to not take too much market risk for short and intermediate term goals or you’ll put at risk what you’re building.

  

6. Upgrade Skills or Education

• Use the funds for a course, certification, or training that enhances your career prospects.

  

7. Consider a Health Savings Account (HSA)

• If you have a high-deductible health plan, contribute to an HSA. It offers triple tax benefits: tax-free contributions, growth, and withdrawals for qualified expenses.

  

8. Fund a 529 College Savings Plan

• If you have children or plan to pursue further education, contribute to a 529 plan to benefit from tax-free growth for education expenses.

• Even more impactful can be completing an education cost benefit analysis for children near or in college.

• If your future graduate can’t payoff their school loans in 10 years or less, it’s likely not a viable choice without additional help from family, etc.

  

9. Treat Yourself Mindfully

• Set aside a small percentage (e.g., 10%) for discretionary spending on something that brings joy or improves your quality of life, ensuring balance between fun and financial goals.

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