The Slacker Method for Building a Nest Egg

Posted by Jacques - January 31, 2009

Nest Egg Saving money for the future can be a tough thing. Especially if most of our energies are focused on the present. If the world stopped tomorrow, would you think to yourself, gee, I wish I had spent more time on my budget?

While I certainly don’t condone forgoing financial planning, it can easily become an obsession. For me, I want to create it once, and then revisit it annually. In between those times, I want nothing to do with it.

Another problem with building nest eggs is that people tend to overdo it. While I agree more people need to save more than save less, we have to be careful to not let it affect our lives. Afterall, money is a symbol of time and power. We want to use it to our advantage, to make our lives and the lives of others meaningful and enjoyable. Too often people become slaves to their 401ks and IRAs without realizing how much of their lives they have sacrificed in order to retire. But what is retirement really? That’s another article.

Here are some easy tips for building your future.

Start with an online savings and ROTH IRA retirement account.
The savings is an emergency fund for short term needs. The retirement account is for the future. I would check out etrade, they have among the highest savings rate (3.00% currently compared to my local bank’s .50%), and they can transfer to and from any institution. You can also create your retirement Roth IRA account and make trades right from the website. An article at Lazy Man and Money gives some more specifics about what your portfolio could look like.
Invest your retirement in index funds.
Even Warren Buffet would agree with me. If you want the best long-term appreciation which is mainly what a retirement account is for, invest in a good index fund. You don’t have to worry about what company or industry is up or down, you automatically have a broad diversification.
Use automated transfers.
There are so many reasons why automated transfers are your friend I can hardly begin. First, they will make saving effortless because… well, they require no effort. Everytime your paycheck is scheduled to come in, the money should come out. You’ll get used to the lower cashflow than you think, and after a while, you won’t even remember you’re saving anything at all until you need it. You can also schedule trades in the same way, every 6 months invest the same amount of money into an index fund. You’re using a well known method called dollar cost averaging without even thinking about it.
Take advantage of special savings programs.
Keep the change, Way2save, and other special promotions help you save by giving great savings rates up to 5%, and by making it mindless. Just use your debit card like you normally would, and the savings will start flowing into your account like magic.
Claim 0 Allowances on your W-4.
Marking zero allowances will force you save by having extra tax withheld from your paycheck. At the end of year, you’ll get a big refund check. Now I know many personal financial advisers would greatly criticize me for saying this because they think that you could earn interest on that money you’re loaning to the government. I’m hear to tell you that they’re wrong, because if you’re living in the moment, you’re spending that money, and if you were good with money to begin with, you wouldn’t need to read this article or need to listen to financial advisers. So yes, you need to have the government hold your money hostage until you can fully understand how to responsibly manage it yourself. You will be grateful, trust me.

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January 31, 2009 | In All Slacker Methods, Slackers and Money |

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Your financial advisers do have a point, simply because if you’re already doing #3, you don’t need #5 at all. Just find out what the monetary difference is each paycheck between 0 allowances and whatever you’re claiming now (ask a payroll/accounting person at work). Then add that to your automatic transfer. The end result in your “spending account” will be exactly the same, and you’ll have more in your savings account at the end of the year. (Of course if you’re not going to bother with the transfers, then yes, 0 allowances is total slacker way to save).

Comment by meggo — May 17, 2009 #
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