When Brian and I were younger we used to stress a lot about saving for the future and putting money away like you’re supposed to do as adults — even if we didn’t always have the money to save. And when we didn’t have the money, we felt guilty and that brought on more money stress.
Trying to do it on our own was okay. Hiring a CPA to help with taxes was better. Finding a true financial advisor and CPA to work with us as a partner in our financial future changed everything.
Saving For Retirement
The first piece of critical financial advice we received came from one of Brian’s fire captains:
Max out your retirement savings as early as possible and get used to living on what’s left of your salary after your accounts are maxed out. If you don’t begin putting money away for retirement until later, it will feel like you’re giving yourself a pay cut and you may have to make unwanted sacrifices.
Brian began contributing to his retirement accounts when he was 20 and I began contributing to my 401k at the age of 23. We weren’t putting away a ton at first, as we bought our first house at the ages of 21 and 20 respectively. Plus, paying a mortgage on a house we were doing a tear down remodel on while I was still in college, made finances pretty tight.
Our goal was to increase our contributions every year until we were both maxed out.
Brian was working at the fire department, and every time he received a raise, he allocated 25-50% of the raise directly to increasing his contributions until they were maxed out. This allowed him to reach the maximum retirement contribution amounts without sacrificing pay we were used to receiving.
In 2005, when I quit my job and started Bourn Creative, we didn’t have any cash savings in the bank, so we cashed out my 401k and stashed the money in the bank as “oh $hI+” money. Luckily we never ended up needing it, but I did stop contributing to my retirement account for a few years to get the business off the ground.
After a particularly painful tax year, we knew we needed a new CPA and a friend connected us with our current CPA, Sean Boyd (also known as Mr. Loophole). Sean has had an overwhelmingly positive impact in our financial well being, helping us improve cash flow, reestablish my retirement account, and start Brian’s 401k when he left the fire department.
Saving For The Future
In helping us keep more of the money we make, Sean gave us a great piece of financial advice that has helped eliminate financial stress:
Keep a minimum of 3-6 months of expenses in the bank at all times — and be diligent about it.
Nothing beats having cash on hand. Boosting our cash savings, personally and professionally, has drastically reduced any stress we had around paying vendors, subcontractors, or other expenses. It took several years to achieve, but it has also allowed us to absorb unexpected expenses like new tires, the a/c going out, or the dishwasher breaking, or unexpected business hiccups like a $60K/year client cutting back to $20K/year, without it affecting our normal budgets.
But here’s the thing: you must resist the urge to spent it!
I know that having 20-60K+ cash in the bank makes it really easy to spend money you wouldn’t normally spend. That big screen television, boat, new car, vacation, dirt bikes, hover boards, furniture, kayaks, or even a pool isn’t worth the financial stress that spending that financial cushion will bring. Living a cash only lifestyle is so much better!
Saving For College (Sort Of)
When we had our children, all anyone ever told us was to start saving for college right away. It was amazing how many people were on our case about starting college savings accounts for the kids — even strangers! So when we started working with Sean, we asked him about starting college savings accounts for our kids.
Sean then dropped the best financial advice on us that we have ever heard:
You can get loans to pay for college, but no one will ever give you a loan to retire.
Mind blowing. From student loans to financial aid to bank loans, there are numerous ways to fund college. Borrowing money for college is normal and expected. But he was completely right about paying for retirement — no one is going to give us a loan to simply live on. No bank is going to give you money to retire.
So with Sean’s guidance, we continued to focus on our goal of contributing the maximum amount possible to our retirement accounts every year. It took us a few years, and in the tough years during the recession, we did scale back our contributions, but eventually we did it — and it felt good.
Only now are we able to begin looking at more creative ways to invest, save, and grow the money we make. Only now, because we know that we are taken care of, can we look at diversifying our savings, consider college accounts, and who knows, maybe now that our kids are older and my daughter is blogging too, we may even explore hiring them to work for us…
What About You?
Are you actively saving for retirement? Are you working toward maxing out your contributions? If you’re already maxed out, do you have any other tips or advice to share that helped you get there?
I’d love to hear from you!