Saving $5000

In the examples in my previous posts, I use the metric of saving $5,000 a year. How hard is this - maybe not as hard as you think.



If you have a good 401(k) match at your company, then you may simply have to contribute $2500 a year to mee the $5,000 goal and your company will make up the rest. Not only that, since the $2,500 is taken before taxes, less than that amout is taken out of your pocket. For example, if you are in the 25% tax bracket, only $1,875 of that $2,500 would have made it into your pocket anyway. So, you may be able to sock away $5,000/year in a 401(k) by only taking $1,875 out of your pocket per year; $156/month; $36/week.

Of course, not everyone has a dollar for dollar company match (me included). Even if all you get is tax savings, making a $5,000/ year contribution takes significantly less than that out of your pocket. A company match decreases the amount taken out of your pocket even more. Under the 100% match example discussed above (admittedly sort of a best case scenario, but not entirely unrealistic) you can save $5,000 in your 401(k) for only $1,875.