top of page

Sign up for our mailing list

Thanks for signing up!

How To Save An Extra $7k/Year

  • Writer: Timothy Iseler
    Timothy Iseler
  • Jul 21
  • 4 min read

A few weeks ago I shared a post about how to turn $7,000 per year into $1 million. (If you haven’t read that post yet, you can pause now and give it a once over. Ok, are you back?)


Spoiler alert to everyone who didn’t read that one: you can turn $7k per year into a million dollars by putting it in a traditional IRA, using that money to buy a diversified US stock market index fund, and then waiting for around 29 years. That’s it, there’s no extra work, no super clever strategy; just put your money in an IRA, buy the simplest investment, and let time do the work for you.


But, if you’re like a lot of creatives and self-employed people, you might think to yourself, “great, but where am I gonna get an extra $7,000?”


The trick is to adopt a mindset of paying yourself first. When I talked to my buddy Jeremy Lemos on my podcast, he put it really well: you have to pay your rent, you have to pay your bills, and you have to pay yourself. And that applies to every single gig and every single paycheck: some portion of that is for you to keep to make life easier for future you.


You can’t wait until you’ve bought everything you want to buy and then see what’s left over. That’s paying yourself last: giving everyone else your money and then hoping for the best. I’m here to tell you loud and clear: that’s a recipe for failure.


Likewise, you can’t wait until the end of the year or right before tax filing time to figure out how you’re going to save. It’s true that you CAN contribute to an IRA right up to the previous year’s tax filing deadline, so in a literal sense you can procrastinate up until that point. But again, that’s paying yourself last. Let me put it this way: if you don’t have an extra $7k laying around to invest this month, what makes you think it will be different when you file taxes next year?


Ok, so that’s enough of the ol’ bad cop routine. Here’s the good cop: you can pay yourself first by slicing up that annual IRA contribution into smaller chunks, then automating transfers to make sure they happen without any extra effort on your part.


$7,000 per year works out to about $583.33 per month. Now, that’s still a chunk of change – I don’t typically walk around with $580 in my pocket – but lots of you will be able to handle a monthly contribution of that amount. If you can manage a $583.33 transfer into your IRA each month, automate that sucker and call it a day. Take it off your plate and move on to the next thing on your list.


But if $583 feels like biting off a little more than you can chew, let me suggest we break it down further. That $7k per year works out to about $134.62 per week. I find it helpful to frame savings contributions in terms of what else you could buy for that amount. If my sweetheart and I go out to dinner at a nice restaurant, once you throw in a couple of drinks, dessert, and a tip, it could easily be in the ballpark of $130. So for about the same price as date night at a nice restaurant each week, you could max out your IRA. Again, if you automate that transfer, it takes the guesswork out of it.


But maybe you prefer less expensive restaurants and $134 still sounds expensive. Totally fine. Let’s continue reducing that $7k per year down to a daily amount. A contribution of about $19.18 per day – about the same price as lunch out with a friend or a movie ticket or a short ride in an Uber – will let you max out your IRA. I want you to really let that sink in: for less than $20 per day, you can save $7k per year. Again, the key is to automate those transfers so that you don’t have to think about it.


Now, I’m not telling anyone what to do here. If you don’t want to save for your future, that’s your choice. But the downside is that there is literally no reward waiting for you when you sit this one out. You either save your money now to have better options in the future, or you keep working forever. Those are your choices.


So if you’re the kind of person who actually does want to make decisions now that will make your life easier, I think that $20 per day is not a super heavy lift. Really ask yourself: how often do you spend $20 on something with no durable, tangible value? I do it all the time, and I don’t feel even slightly guilty about it. Spending $20 on lunch isn’t going to make or break me. So if you’re comfortable spending $20 on something fun, you should also be able to pay yourself first by contributing $20 to your IRA.


And listen, I’m not heartless here. I want everyone to be saving today so that you have more and better options in the future. If you really, really can’t afford to put $20 per day in your IRA, then aim for something a little more manageable. Can you do $15 per day? That’s $5,475 per year. How about $10 per day? That’s $3,650. 


Remember, you don’t need to wait until everything is perfect before you start making good decisions. Don’t make perfect the enemy of good. If you can’t max out that IRA, that’s totally fine; but don’t let it stop you from getting started. And, one more time, make sure you pay yourself first – preferably by automating regular contributions – by saving every time you get paid instead of waiting until AFTER you’ve paid everyone else.


If you want to have a conversation about investing for the long-term, hit me up. This email address is always checked by yours truly.


Thanks,


Timothy Iseler, CFP®

Founder & Lead Advisor

Iseler Financial, LLC | Durham NC | (919) 666-7604


Iseler Financial helps creative professionals remove stress while taking control of their financial lives. We'll help you get oriented to your financial life, clarify and refine your long-term goals, and prioritize decisions to improve life now and later. Find out if we're a good fit.

Yorumlar


bottom of page