Start Your Engines…

It’s the weekend, which means no 9-5 to drain away all our creative energy. Now that we have some fresh perspective and the opportunity of early retirement as motivation, WE ARE READY TO PUT THIS THING IN THE FAST LANE.

If we were to boil down everything we’ve talked about so far into a to-do list, it would look something like this:

1-Take a look at your spending.

Is there money being traded for things that do not contribute to your level of happiness? Where are there leaks in your engine? Do you need cable? (The answer to this is a hard NO). Evaluate all the spending you have done over the past few months. See what purchases were truly in line with your happiness. Get a free financial tracker like Mint so you may easily evaluate your spending every once in a while. Take a look at your savings rate and see what improvements can be made.

2-If you are employed, max out your 401k matching

Most employers will match your contributions up to 5%, if you are not contributing at least this much, go out onto your front lawn right now and yell “I’M A MORON” loud enough for your neighbors to hear, then come back inside and fix it. It is a rare occurrence to be given free money, don’t pass it up.

3-Get your idle cash working for you

First, analyze your debt situation. Any payments on debt give you a GUARANTEED return of whatever the interest rate is. The next step is to open up an account with Vanguard. If you would like to do your own research with mutual fund companies, by all means, do. I like Vanguard because it is client-owned and has some of the lowest expense ratios in the industry. Explore their funds, read up on the concept of diversification and index investing if you are not familiar with it.

4-Open up a high interest bank account.

You won’t be keeping any more than what you need in the short run in your bank account, the more you have earning that magic 7%, the better. As for the rest, take advantage of the buffer against inflation offered by online banks.

5-Set up some automation in your new and improved engine.

It really is a thing of beauty when your money is divvied up each month into appropriate amounts and fed into you retirement account, index funds, and your bank account all without you lifting a finger. Banks and credit card companies make it really easy to set and forget automatic payments. Some people may worry and say, “but I don’t want so-and-so company to be able to charge my card without my authorization each month!” Relax, you receive two great benefits by automating payments onto a credit card. You never risk a late payment, and, credit card companies are all to happy to be ruthless on your behave. If a charge comes up that you disagree with, simply dispute it with your card. When Amazon decided to start charging me $40/month for a service I did not sign up for, I simply called my card company and told them I would like to dispute the charge. I instantly received my $40 back and have not had a mystery Amazon charge since. Have no fear in automating your payments. Remember that a sound engine requires minimal maintenance.

I’ll keep it short and sweet so you can get these done. Make sure you are thorough in step one, as it is by far the most important. Learning to live on less will get you 90% of the way there. Check out some books on happiness, you will soon come to the conclusion that higher spending does not produce higher life satisfaction.

Establish an attitude of optimism, self reliance and efficiency.You will discover just how quickly your accounts overflow once the waste is cut out, leaving you in a financial position of control over how you live your life.

Knocking these out shouldn’t take more than a couple of hours. When you are done, shove as much fun as you can into this weekend. Go Canoeing, ride a bike!

The fresh air will feel even sweeter knowing you just took this great leap ahead.