Entering the workforce can be a real shock when you are just out of college. There is not a lot that can prepare you for the complexity of the first paycheck that you receive. One of the most important things to figure out right away, is how to contribute to your 401K as much and as soon as possible. Saving for retirement could be one of the most important things you can do as a young person and making sure you understand the ins and outs of 401k is top of the list when it comes to getting started.
Learning how to smooth your path to retirement at an early age is very important at an early stage in your career. The earlier you start to think about retirement savings and maximizing your 401k, the more money that you are going to end up with in your golden years.
Figure out how to acquire new skills that are going to help you save and not help you spend money. The more that you learn how to cook your own food and fix your own house, the simpler it will be to save money and funnel it into your 401K.
First off, you need to get a handle on your debt. You won’t be able to outpace the interest on your debt with the growth of your 401K, so you need to get rid of as much outstanding debt as possible. Put all your energy into working down that debt and taking your obligations to a minimum.
Increasing your salary at work is another way to power up your 401k balance. The more money you make, the more that you can plow into that account and the higher amount that your employer can kick in. Asking for a raise is not the easiest thing to do as an employee, but learning those negotiation skills are very important early in your career.
The key to a 401k really working for an employee is the employer match. When the company agrees to match up to a certain percentage, that is like free money. Because the sooner that you start to add in the company’s matching funds to your account, the sooner that the account can being to accrue its compound interest. That is where the real growth for your living fund in your golden years comes from.
While you should check out your retirement account specs every quarter or so, you don’t want to obsess over it every day. You want to put it out of your head and let the long term investing do its work. There is no value in watching the market dip and dive on a short term basis and then get all worked up, when it is going to work out in the long run. Investing in a 401K is all about the buy and hold strategy. There is no getting rich quick here.
Another way to really make your account shine is to forgo human advisors that charge a lot of fees and just use a robo advisor. The returns even out over time and you save a ton of money on needless fees for the advisor class.