In the last decade many people were ultimately hurt because the consumer price index which measures inflation on consumer staples goods, increased at a much faster rate than wages did. This seems to be changing a bit now, but I want to bring across and idea that I like to call creating your own pay raises. This idea is also great for an emergency fund idea if you dont have a typical type of income (however I would suggest cash for an emergency fund mostly). Instead of waiting for your employer to raise your salary, you can do it yourself.
The idea here is that you want to contribute more than what the maximum is for your IRA or pension. An increasing amount of people dont have a pension or 401k options these days, so this might be for you, especially if you run your own business. There are many ways you can give yourself a pay raise because there are many ways that you can use your money and invest wisely but ill give an example of a few ideas that I like.
First these methods are usually after you cap out your IRA contributions, which is roughly $5500. Dont stop putting away money just because you maxed out your IRA, start contributing to a basic retirement account. Another option entirely is to just use the extra money to pay off debts because that will lower your expenses as well. If you can keep your expenses low and save more, you can invest in value stocks that pay decent dividends but also have good growth potential. You dont have to reinvest the dividends, you can use them as a raise you give yourself.
Dont touch the IRA dividends though, those dividends are more valuable because of tax implications but on a regular brokerage account, you can take the dividends if you have enough money set away. There is also the 1% or 2% rules you can use which is basically the idea that you take 1% or 2% of your brokerage account each year and use it as a pay raise. With 1% you will most likely never actually run out of money and your principal will grow much more than that each year and with 2% its a bit higher, but you will usually have the same results.
If you are saving for retirement and catching up due to lost time, these are not recommended at all. You are going to want to have as much as you can, but if you start young and live with little expense, you have the benefit of having more than you need for retirement. The key is time, if you have more time the more options and more creative you can get in how you manage your money. The other option is mastering a hobby that you can use to make you money, whether that is teaching or tutoring people about it or if the hobby itself produces goods. There are a ton of options out there you might just have to be a bit creative.
-Calaber24p
VERY good advice here, thanks.
One thing I have historically done, is switch companies every 5-6 years. Things typically get a bit boring unless you get a promotion or move to another job focus (at least for me they do)...so moving jobs usually happens for me. Along with it, a negotiated pay raise.
The odd thing is, there really isn’t much loyalty when you work for s large company. They don’t consider you for promotion or a big raise until you’re half way out the door...and at that point, why stay? There is more learning and growing waiting for you across the street.
Good post, and something to practice. Thanks.
Do you see 5-6 years a sweet spot for staying? I’m at 2 years right now and thinking how long I want to stay.
If you are in a specialized field or one that is in high demand this is a pretty good idea. You take on extra risk but some people with great job security can handle it.
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I like your alternatives for future savings. My concern is that with 401K and IRA I just don’t belive the goverment, if they loose control “WE THE PEOPLE” loose everything first when it comes to our retirement savings. I think that inflation expectations are too low. If people don’t think there’s going to be inflation, they’re wrong. I think that those expectations are totally wrong. People are ignoring what is going on in the currency market, what’s going on in the commodities markets, what’s going on in the bond markets. All of this stuff is flashing red inflation, at least the way it’s being measured by consumer prices. I think the best way to protect yourself against inflation and to be able to somehow survive retirement age is “I’m certain you already mentioned it” to buy fisical assets such as commodities or short the dollar by buying other currencies from countries not having so much debt. I would add to all of it cryptocurencies as well as protection against dollar collapse and inflation.
There would still be value in the corporations if the government collapsed. Albeit people would panic and the prices would tank but many US companies are so international at this point that as a whole they most likely would never just collapse and go to zero, they would just likely move homebase elsewhere. I dont think in the long run stocks have much to worry about in general.
Thanks, I have been fallowing you for some time and I noticed you know what you are talking about. It’s like in my profession, people are asking me a lot for an advise, because they trust me and they know that I give them the best answer.
Thanks for this awesome piece of information a ND advice.
Great tips and post about money
@calaber24p was told stuff about you and obviously it was said well. I am new here, Just had a post and I wasn't disappointed by this first post of yours I'm seeing. you are an inspirer.thanks sir!
very useful tips especially for me.
hmm I think this is the best idea for salary increased..
great writing dear and very well post.