It’s nice to feel appreciated. It’s even nicer when that appreciation is shown with a $500 American Express Gift Card and a couple of extra days of PTO (paid time off.)
Is $500 Burning a Hole In Your Pocket?
So, what should you do with that $500 from Uncle D that you rightly earned having worked your butt off during busy season? Spend it!
It may seem like a trick when a financial planner tells you to spend a windfall. And you’re right, because there is a catch—I want you to increase your 401(k) contribution by $500. Here’s why you should do it.
- Your Cash Flow Won’t Change
If you put away an extra $500 a year into your 401(k), the amount of your disposable income likely won’t change by even a penny. You’ll easily be able to afford the additional $500 contribution to your 401(k).
- You’ll Save More Money—This Year and Every Year
I’ve previously written (and spoken) about the amazing properties of the 401(k) provided by Uncle D. This isn’t the type of 401(k) into which you only contribute enough money to receive the employer match. The 401(k) offered by Uncle D is so good that you want to shovel as much money into it as you possibly can, and the $500 gift card is an extra incentive for you to maximize your contributions.
Next year, you’ll likely forget about all of this discussion. You’ll have forgotten that you’ve increased your 401(k) contribution by a measly $500 a year, but that extra $500 a year will add up to big bucks over time. How big? Well, assuming a historical rate of investment return and a long time, you could be looking at well over $100,000. You don’t need to be an auditor to know that socking away a few hundred bucks a year to achieve well over six figures is a good deal.
Remember to Up Your 401(k) Contribution
So, now that you know what to do, don’t forget to do it—increase your 401(k) contribution by $500! (You can certainly increase it by more than $500 if you’re up for it.) Also, remember that if you haven’t already made the decision to opt between a traditional 401(k) and a Roth 401(k), strongly consider the Roth 401(k).