How to Supercharge Your Paycheck

My paycheck has been on a rampage upward over the last four months. Here, check it out in my financial journal:

This growth has been so epic because I haven't worked any longer hours, I haven't kissed up to any boss, and I haven't even received a raise! Then how hell did it happen?

Here. Let me share the hidden green. 

In September I began the magic of contributing to a 401k.

My employer's 401k is through Fidelity. Those are the three stocks I contribute to: FCNTX (70%), JATTX (15%), OIGAX (15%).

My employer's 401k is through Fidelity. Those are the three stocks I contribute to: FCNTX (70%), JATTX (15%), OIGAX (15%).

A 401k is simple. It works like this:

Normally your paycheck goes from your employer to you. And along that path the government jumps in and collects about 20% for taxes. That's $200 of every $1,000!

But when you set up your 401k it's different. The government never jumps in to collect taxes on the amount you elect to go in to your 401k.

The portion of your paycheck that goes in to your 401k is not taxed.

For example, let's say you make $2,000 before taxes each paycheck. And you have elected for 50% of each paycheck to go in to your 401k. Here $1,000 will go to your 401k TAX FREE! And the left over $1,000 will be taxed. Which means you'll receive $800 in your bank account.

This is heaps better than just accepting a normal paycheck and saving 50%. If you did that, you'd take home $1,600 and save $800. With the 401k you're boosting that by $200/paycheck! So what did I do?

Back in September I set up my 401k, and cranked my contribution up to 90%.

My employer sets the contribution limit at 90%. If they let me go to 100% I gladly would have done it.

90% seems crazy, right? I mean how could I survive off 10% of each paycheck (8% after tax!)? Well I had 7 months of spending sitting in my savings account. My idea was I would live off of the money in my savings while I shoveled as much as possible in to my 401k for the end of the 2015 year. And that's what I did!

It took two pay cycles for the 90% contribution to kick in. But even with the slow start, 

I was able shovel to almost $9,000 in to it by the end of the year! 

That $9,000 was important because if I had started in January of 2016 the $9,000 would have filled up the 401k's $18,000 limit for the 2016 year. But since I shoveled it all in in 2015 the $9,000 instead filled up 2015's $18,000 limit. Hence keeping open 100% of 2016's $18,000 worth of 401k contributions (tax free money!).

I'll be lowering the contribution limit after this coming paycheck. It's time to refill my savings/emergency fund. But I thought I'd share how big of an impact contributing to your 401k can have.


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