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January 05, 2011

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Why save that additional amount in a taxable account if you can do it through the 401k tax-deferred?

You shouldn't need to go through this old ritual of making financial resolutions every New Year.
Becoming financially secure starts early in life.

Starting off you need to make education your very first goal. Don't take the easiest path but take the one that is going to lead you into a long standing, secure, and well paying career, and that doesn't mean an expensive BA in some fancy liberal arts field that won't do much for you on your resume.

Next is to start thinking about a lifetime partner. This is incredibly important. The failures that I have known in my life are often the people that have had multiple marriages and divorces. This is one thing that you need to strive to get right the first time.

Next, you need to learn how to SAVE. Any Dumbo knows how to SPEND but a minority seem to understand the principles of consistent saving and sound investing. I know, especially in this generation, young people place "Having Fun" as their #1 priority but that needs to be tempered with looking out for one's future security.

Lastly, learn not to make impulsive decisions since they will often come right back and bite you where it hurts the most. Learn to examine all the options on the really important decisions in your life. Do your homework and be open to taking advice from people that are a lot older and more experienced than yourself. Don't have a closed mind to negative comments about your decision, you need to consider all the negatives as well as all the positives and make sure your final decision is the best possible one.

I can look back at the key turning points in my life. There are only four or five of them but it's important to not take a bad turn because it can consume years of your life as well as costing you a lot of money and put your future retirement at great risk. Don't let those wonderful Golden years become the unhappy and sad years, as is currently happening for so many.

"At this point you are saving more than 35% of your salary and living on less than 65%. This is the benchmark for a millionaire mindset."

Well said. I like how this exceeds what some advocate, which is about socking away 10% and feeling secure about it.

A few months ago while a friend and I were discussing savings, I mentioned that I had been saving more than a third of my income since my early twenties (I'm now 35). My friend was incredulous and could not even grasp how someone could save that much of their income. I assured her it was possible, and not very hard even if you start small (10%). She recently paid off all her consumer debt (other than the mortgage) so I advised her to start now by taking any raises/bonuses/etc and snowballing them into her existing 10% savings and she'd be surprised how quickly she got to a 30% savings rate. Being free of debt really helps.

My first and only resolution for 2011 as far as money goes is to simply get out of debt. by eliminating all my credit debt everything else you stated will just fall into place. All my extra money for now is going toward my credit card debt. Once I get rid of this debt, my savings potential will literally go through the roof.

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