matching contributions

Checking the Couch Cushions

It’s been a while, but I do remember scrounging for change—flipping over couch cushions, checking the slot at the vending machines, walking a parking lot for anything that’d been dropped or forgotten.

A paper route and other gigs soon changed my focus, and I discovered the power of steady income. Whether we’re talking about one-off opportunities or streams, there are plenty of ways to check for change in the couch cushions.

Maybe you’ve heard someone advise you, “Don’t leave money on the table.” It often comes up in negotiations or sales situations, but there are scrounge-worthy lessons for many areas of our financial lives. Some ideas we love?

  • Knowing what you need—and not just what you want or could use. This self-knowledge provides great perspective. When we keep the basics in mind, we know where the bar is. Anything above the bar is extra, bonus, a cherry on top. The practical implication is that awareness makes us more patient. If a purchase or expenditure is not an immediate need, we know we can afford the time to wait for a sale, a deal, a change of season, or any other more opportune moment. This is saving your scrounging for the right time.
  • Asking for what you’re after. You know we believe in the practice of transparency: there’s not much to be gained by withholding our goals or expectations. It gives the other parties involved—a boss considering your next raise, a mentor, a new financial advisor?—a chance to do their best for you. And if people still aren’t in alignment, wouldn’t you rather know sooner than later? This is a method of scrounging for time to work toward your goals.
  • Remembering you don’t know what you don’t know. This could be a productive conversation starter for anyone in your circle you trust. It’s something you could ask your tax professional, your employer’s human resources department, or even our office: “In your experience, what’s something I may not know that I don’t know?” There could be opportunities people wouldn’t know to think of! This is scrounging for possibilities.
  • Maximizing those matches. Yes, you know this is a favorite of ours: take full advantage of any employer match on retirement contributions. It’s more bang for your literal buck. It’s free dessert for eating a balanced meal.

We should note that we believe in leveraging opportunities: we do not believe in abusing any system to the detriment of the community. (Many of us learned our lesson in childhood: our siblings’ rooms are not fair game for scrounging the way the couch cushions are!)

There are, however, plenty of aboveboard strategies for scrounging. Opportunities abound. Which are worth it?

Clients, when you’d like to explore this topic—or anything else—write or call.

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Play the audio version of this post below:

Checking the Couch Cushions – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

Working? Here’s Some Basics.

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What has been the biggest factor in helping people end up financially sound in retirement?

In our opinion, it is the availability of retirement plans in the workplace. This article is a primer on the high points. If you are on the job, this may be key information for you.

Employer-sponsored retirement plans have a number of features that may help people build wealth. They go by different names (401k, SEP, SIMPLE, 457, TSA, 403b etc.) but generally share these features:

1. Once you sign up, you invest automatically every payday. It takes no effort or thought month to month—you put your asset-building on autopilot when you enroll.

2. The arithmetic of pre-tax retirement plans can be compelling. For some, for every $5 they contribute, their paychecks may only go down by $4. Taxable income goes down, so your income taxes go down. A potential tax break for the working person—imagine!

3. Some employers match your contributions to some extent. A fifty-cents on the dollar match means if you put in $5, your employer will add $2.50. That’s like a 50% return on Day One! (Employer contributions may be subject to vesting, so you might not keep the whole match unless you stay on the job for up to five years, for example.)

We are always happy to talk to you about your situation, and how you might use an employer plan to get you where you want to go. But here are a couple of rules of thumb. These are general pointers that may or may not fit you, but some have found them useful:

First, saving 10% of everything you ever make is a good way to start on a sound retirement. If you aren’t there and cannot contribute that much, ratchet up your savings rate by 1% a year if you can—every year. Some clients make a habit of putting raises (or half of them) into the plan, or increasing their contribution rate by 1% per year.

Second, if you are a long way from retirement, you can afford to take a long view with the investments you choose for the plan. Why take a short term view on money you probably won’t spend for many years, or even decades? But the choice is yours—most plans give you options.

Clients, call or email if you would like to talk about your situation or any other pertinent topic.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.