Money Hacks

The March 2007 issue of Money magazine has a sidebar that gives a rule of thumb for determining how much you should have saved for retirement. The information is geared toward Boomers, though, and so the start age is 45. Still, it should give you a rough ideas of where you should be.

In other words, if your income is $50,000/year, you should have about $300,000 saved at age 50.

I’m not sure how these numbers were derived, so it’s hard to say how to determine guidelines for folks younger than 45. I know that I hope to have 2x my income saved by the time I’m 40, but I feel like I’m a little behind the curve.

The best-known money hack of all time is simply to pay yourself first. Every time you receive money, set aside a portion (many people set aside 10%) for personal investment. Put this money into a savings account, a certificate of deposit, or some other form of investment. Never touch it. Do this on a regular basis and you will accumulate wealth.

The key to this hack is to actually set the money aside before you can spend it. In order for this to work, you must make it a priority to literally pay yourself first.

In The Automatic Millionaire, David Bach details how to remove all temptation by making this saving forced. Chapter three is entitled “Learn to Pay Yourself First”. Chapter four is “Now Make It Automatic”. The entire book offers advice to make this happen.

One of the easiest ways to begin to pay yourself first is to take advantage of a salary increase. The next time you get a raise, don’t give in to lifestyle inflation. Instead, take that pay increase and sock all of it into savings. Think of this as a gift, a free chance to implement this money hack.

Many of us know this hack. Many of us preach it. But how many actually put it into practice?

[Read more at Get Rich Slowly — Pep talk: Pay yourself first]

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Get free, personalized answers to your financial questions. For the fifth time, we are joining with the National Association of Personal Financial Advisors (NAPFA) to sponsor Kiplinger’s Jump-Start Your Retirement Plan Days. From 9 a.m. to 6 p.m. eastern time on Friday, January 26, NAPFA members across the U.S. will be standing by to take your calls and answer your questions.

Normally, these fee-only planners, who are well versed in investments, taxes, insurance, estate planning, and retirement and college saving, charge clients $100 to $250 an hour. But on Jump-Start Days, you pay nothing — not even for the phone call. Just dial 888-919-2345.

Our retirement hotline is a public service that is offered to all, not just Kiplinger’s subscribers. If your questions can’t be answered on the spot, you may be referred to resources on the Internet that will help you find the information you need.

This is an amazing opportunity. If you’ve been wanting to seek retirement advice, now is the time to do it.

[Kiplinger's Personal Finance Journal: A Free Retirement Checkup]