In a little over month I will receive a small raise at work to the tune of $2,447. While I’m stoked to be getting any raise at all, let’s be real, it’s not a life changing amount. In fact, it only works out to about a $75 net gain each paycheck. Big Macs on me tonight guys. Wait… too expensive, ninety-nine cent Jack in the Box tacos on me instead 🙂
Since Girl Ninja and I are already able to put a good chunk of our discretionary income into savings each month, we decided to be responsible and increase our retirement contributions. Instead of throwing 5% of my gross income in to my 401K each month, we increased that sucker by another 3%, for a total 8% contribution. My employer matches 5%, so in total 13% of my gross pay will be going in to my 401K plan. Is that hot or what?
So I get a $2,447 raise, and before I even have a chance to see it in my paycheck, we decide to throw $2,200 of it in to our retirement. If that’s not keeping up with the Joneses I don’t know what is. SIKE! I hate the Jones family and everything they stand for.
Since I’m a self-proclaimed PF nerd, I thought I’d run a quick calculation…
If we keep throwing that $2,200 in to our 401K plan for the next 40 years, do you want to know how much extra we’d have come retirement? This example assumes an 8% rate of return.
You can see the decision was easy. Get $75 extra in each paycheck? Or have an extra $765,000 waiting for me when I’m older? I don’t know about you, but I’m picking the latter every time.
Lifestyle inflation is cool and all, but if we are already content with what we have, what else is there to inflate besides our savings, retirement, and charitable contributions? I’m not going to go run out and buy another TV or laptop just for the hell of it (pardon my language).
Last time you came in to a little extra money, what did you do with it? If you had to inflate your lifestyle in one aspect how would you do it? (We would probably dine out a little more, or maybe pay for a maid service).