I have big debt payoff goals for 2017. I also know that we have some expenses coming up that are necessary (e.g. a new electrical panel, etc) for our household. However, even though I know we have these expenses and I want to pay off our car I decided to max out one of my retirement accounts for the first time.
I have three different retirement accounts. I have a 401(a) not a 401k. I have a 403(b) in addition to my 401(a) and I have a Roth IRA. The 401(a) and 403(b) are offered by my employer. I am mandated by our union contract to contribute 11% of my income to this account. I cannot add a greater percentage to that account contractually. To supplement my retirement accounts I opened another tax deferred account in 2008. Over that time I have slowly increased my contributions. I went from about $300 a month to over $1000 a month. To maintain my level of take home pay I started to teach extra courses to make up for the lost of that income per month.
Today I made the decision that in order to get to greater financial independence I needed to go even more hard-core so I decided to increase my retirement contributions to the max limit, which is $18000 per year. I figure that eventually my income will catch up with these retirement contributions and I won’t have to increase them that much in the future.
One of the bad things about this is that it reduces my take home pay by about $300 per month. That doesn’t sound like a lot, but when you are trying to pay off debt, save for household expenses and the like it can be a bit hard. My rationale is that we need to potentially tighten the screws on our budget a bit more. I need to stop eating out for lunch all the time, we could eat at home more and not get take out all the time. There are some things we can do to reduce our budget by $300 so I hope it won’t hurt us too much. Moreover, I am expecting that I will receive a salary increase later in the year (more on that later when I get more information).
And if it does well I can always reduce my retirement contributions.
So we will see how this goes. I might have to reduce my contributions, but let’s hope I don’t. Let the experiment begin.