December 27th, 2007

vantid

The Millionaire Next Door: The Surprising Secrets of American's Wealthy

This excerpt (free NYT registration required) is worth reading, especially if you think being a millionaire is something only possible for fifth-generation landowners with English accents. The chapter covers the book's major points - if you want more, there's plenty of reviews out there, or you could buy it (hopefully second-hand). Are you a PAW, or is your hat bigger than your herd?

On that note, now's a good time of year to reconsider your financial plans, such as the percentage of your income that you defer to a 401k or other retirement plan. The maximum you can contribute to a 401k in 2008 is $15,500 (plus $5,000 if over 50) - and while this may not be possible for everyone, chances are you could bump it up a few points without too much pain and suffering. Long term, 15% of earnings or more is a good target, though feel free to work up to it - better 10% or 5% than nothing at all. Wondering how everyone else is doing? Check out the stats - and remember, you want to be saving more than the average.

(If you're not deferring anything, you're probably turning down free matching money, on the order of 3% to 4% of your salary. If your boss offered you an extra day's pay every month, wouldn't you take it?)

If you're looking to reduce this year's taxes (through charitable donations or otherwise), now's also the time to follow through - though one way (investing in a Traditional IRA) remains possible right up until you have to file. Of course, you might find the Roth IRA preferable - it doesn't give you a tax break, but the money that comes out is tax free. Either way, there's a tax credit available for low-income savers - the government wants you to put money away, and it'll give you up to 50% of what you save for doing so.

Finally, if you've recently received a bonus or monetary gift, consider investing it in your future rather than blowing it on something that won't bring you happiness much past the New Year. Just make sure to pay those credit cards off first!
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