retirement pig

There’s a way to prepare for the early retirement you want without sacrificing the life you have now. We know because we’re doing it!  We spend every weekend experiencing new adventures with friends, exploring our beautiful state, or even taking affordable trips to destinations around the US and Central America. How did we get in this position? To start, by following these Making Money Work for You Beginner’s guide steps, outlined below.

The big key to success is to make your money work for you. The process of saving and banking money for retirement should be so automated that you can just sit back and watch the retirement savings pile up. By implementing the  tips below, we are saving nearly half of our income per year for future use. I want to help you do the same.

Beautiful Mt Sherman with my husband and Kiwi!

1. Automate Checking Accounts

Click it and forget it is the name of this game. Most corporations will allow employees to split paychecks amongst multiple savings and checking accounts. Our corporations allow just that, so we have taken full advantage of splitting our paychecks between multiple accounts.

My husband and I split our paychecks between four accounts (2 checking and 2 savings). We have set up these checking and savings accounts so that both our mandatory and discretionary spending needs are met, while still saving a large portion of our paychecks. Each and every one of our paychecks is divided between two different joint checking accounts and two different savings accounts. The spreadsheet on the side of the page explains this in more detail and will help you lay out your own budget in a similar way. Downloading it is free and it’s a great resource!

We use our joint checking accounts for two things: 1) To withdraw our bi-weekly cash allowance; and 2) to pay our recurring monthly bills. The cash allowance and recurring monthly bills are covered by two different checking accounts so that we never co-mingle the amounts in these accounts. All of our mandatory and discretionary spending is covered by these two checking accounts.

Joint Checking Account #1

This joint checking account is only for our cash allowance. No other money goes into this account. This prevents us from being able to access additional funds and exceed our monthly cash budget. We have our monthly cash budget set at $1080/month total between the two of us. This cash budget of $1080/month covers all of our discretionary spending for the month (e.g., groceries, nights out, dog supplies, etc.). This is also our only checking account connected to our ATM card. Again, this prevents us from pulling out additional cash funds.


Joint Checking Account #2

Only our recurring monthly bills come out of this joint checking account. We have a set amount that is automatically deducted from each paycheck to cover our monthly bills, which includes utilities, mortgage, and car payments. The amount deposited into this account is set about 10% higher than our monthly bills to prevent us from needing to pull any funds from savings. We do not have an ATM card for this account so we cannot withdraw cash from it.

We do the Same with Savings

Since our recurring expenses and discretionary spending are covered by our joint checking accounts, we have set the remainder of our paychecks to be deposited into our savings accounts. We have two different savings accounts. One for joint savings where we keep the majority of our remaining savings. The other for covering unexpected costs.

Savings Account #1 (Individual)

This savings account is an individual savings that we use to store a smaller amount of money so that we can cover unexpected costs such as a car or home repair. We keep approximately $1500 in this account. That way if an unexpected cost rolls in, we never have to deduct money from our larger savings account (Savings Account #2). Once this account hits $1500, the rest of our savings is deposited into Savings Account #2.

Savings Account #2 (Joint)

Anything that’s left after depositing our money into Checking Account #1, Checking Account #2, and Savings Account #1, is deposited into this joint savings account. Our goal with this savings account is to never touch it unless we are making a substantial purchase, such as new house or new car. So far, this has worked well. We are depositing at least 10% of our paychecks into this account every month. It is fun to watch this account grow substantially.

2. ATM Fees should become a thing of the past

We live on cash. The last thing we need is to lose some of that cash to ATM fees for each withdrawal. I absolutely hate ATM fees. I think it’s ridiculous that any bank can charge someone for accessing their own money. But sigh, the practice of ATM fees isn’t going to change any time soon.

The reality is that most banks charge ATM fees if someone is not their customer. For example, the Chase bank by my work charges a $3 fee for any non-Chase bank ATM withdrawal. The same thing happens to me if I withdraw cash from a gas station or other public ATM. The 7/11 near my house charges $3.00 per withdrawal as well.  The fees can be ridiculous. In Vegas, some of the ATMs in the casinos charge over $6.00 per withdrawal. Those fees can add up quickly, especially when you are living on cash.

So Find Banks that don’t charge fees…

We use our joint checking account at Charles Schwab for our monthly spending. Charles Schwab is not local to Colorado and has no branch offices near our home. This could mean that we would be forced to pay an ATM fee every time we withdraw money. However, Charles Schwab has a lovely system that allows ATM fees to be refunded to our account at the end of each month. So we are charged the ATM fee upfront but we are refunded the full amount at the end of each month. And we can make an unlimited amount of ATM withdrawals each month. So if we spent $30 on ATM fees during the month of April (10 withdraws at $3 each), Charles Schwab will deposit that full amount ($30) back into our account before the beginning of May. This applies to both domestic and international ATM withdrawals.

I did some digging and the only other bank I could find that refunded unlimited ATM fees was First Republic Rebate Checking.


3. Invest in your 401k

Just the way we described automating checking and savings accounts, I also recommend setting your 401k selection at the highest amount possible. For 2016, $18,000 is the maximum amount that can be contributed to an individual’s 401k. Most employers will also match up to a certain percent, generally up to 3%. That means by investing 3% of your paycheck into 401k, you are getting an additional 3% for free.

One of the best perks of depositing money into 401k is that this is done pretax, meaning 401k is deducted from your gross earnings, prior to State and Federal taxes being deducted. That means if you invest 3% in 401k and make $1,000 per paycheck, you will put away $30 every paycheck. If this was post tax, and you invested 3% in 401k, post-tax would be $800 per paycheck and the amount to 401k would be $24. That’s a loss of $6 every paycheck.

If it’s not possible to max out your 401k to the full amount of $18,000/year , max out the highest amount that works for your budget. This sounds simple but many people never do this. By setting your payroll settings to deduct the maximum amount of 401k per paycheck, your retirement savings will build quickly.


4. Max out your Employee Stock Purchase Plan (ESPP)

For some publicly traded companies, the Employee Stock Purchase Plan (ESPP) is a great way to make an easy 10-15% of the stock market per year. ESPP’s allow employees of the publicly traded company to buy the company’s stock at a discounted price. My husband and I are both fortunate enough to work at publicly traded companies that offer this option. We max out our investment options to ensure we buy as much stock in our companies as possible.

ESPPs not only for large fortune 500 companies either. When I was a nurse, purchasing discounted stock in the hospital system, such as HCA, was also an option. This can be risky during stock market dips like what happened in 2008, but overall, investing in a company at a discount is a wise decision.

Check with your company on vesting periods. Many don’t allow employees to withdraw from their ESPP for a certain period of time. There may be some capital gains associated with any withdrawals from the ESPP, but these capital gains fees will be less than the 10-15% gained over the years.

piggy bank

5. Have Someone Else Pay Your Bills for You

This is one of my favorite tips. Become a landlord. It’s easy money. Let others pay your electric bill, your water bill, your trash bill, and your mortgage. We became landlords back in 2014 to make this a possibility. We live in one unit and rent out the other three. This has allowed us to accumulate savings by not paying bills while still building equity in our home.

Read more on the topic in the upcoming Early Retirement Beginner’s Guide posts.

Blondie approves of being a landlord!

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The author Jodine

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