Episode 1: Compound Interest
Here is the transcribed Building Your Future (BYF) portion of Episode 1 of The Maintenance Arts. Directly below is the BLUF (summarized) version, followed by the transcript itself, and lastly by the “Homework Assignment” from the episode (a downloadable PDF)!
BLUF: You may be missing out on future financial gains by not being proactive with your retirement accounts. Have a conversation with your HR/Payroll department to see if you’re maximizing your contributions. There is also a “homework assignment” below.
Transcript:
“Before we wrap up today's episode, I'd like to leave you with a segment I call, “Building Your Future.” Today’s is a lesson I learned later in life but, thankfully, learned while I still had time to make a difference. My father worked in factories most of his life. In fact, for many years he worked two full-time jobs during the summer just to provide for our family.
My mother worked in factories too, and later worked in an assisted living facility caring for the elderly. Neither one of them made huge salaries. But they understood something that took me years to truly appreciate. Every week, without fail, they paid their future selves first.
They didn't chase the latest investment. They didn't try to get rich overnight. They simply saved consistently; week after week, year after year. My brothers and sisters followed that same philosophy: save consistently, be patient, think long-term. Because of that discipline, every one of them, including my parents, has enjoyed a comfortable retirement.
That brings us to today's, “Building Your Future” thought: Too many people wait until they're approaching retirement before they begin wondering whether they'll have enough money to last them. I'd encourage you to start thinking about your future today. If your employer offers a 401(k) with a company match, and you're not contributing enough to receive the full match, you're leaving money on the table.
That's something I tell every young person I work with. I've seen companies match up to three percent. If you contribute three percent and your employer contributes three percent, You've just doubled that portion of your retirement savings: 6%! Because traditional 401(k) contributions are generally made on a, “before tax” basis, the impact on your take-home pay is often less than people expect.
I’ve seen it in some cases that post-contribution take home pay can be within a few dollars of what it currently is. That’s what I found when I first started contributing to my 401K. Now, the exact amount depends on your personal situation, but it's worth asking the question instead of assuming you can't afford it.
Here's another habit that's helped me: when I receive a raise, let's say it's three percent, (which is pretty common amount now days), I increase my retirement contribution by one percent, and then take the other two percent as my raise. I'm still bringing home more money than I was before. But, I'm also paying my future self, and we haven't even talked about compounded growth yet.
Do this for yourself and your family. If you've never looked at what consistent investing can become over ten, twenty, or thirty years, take a look now! If you don’t believe me, ask Google or ChatGPT. The numbers might surprise you.
Most importantly, never be afraid to ask for help. Go talk to your payroll department or Human Resources. Tell them you don't understand it, and that you have questions about it: that's what they're there for! The conversation is free, and it’s a discussion that can change your future.
I think one of the greatest gifts you can give your family is not having to worry about you, financially, when you're older. Building your future isn't just about taking care of yourself. It's also about taking care of the people you love. So, today's “Next Step” or homework, is to find out if your employer offers a retirement plan. Then, see if you're contributing enough to receive the full company match. If you don't know, ask! That one conversation may become one of the best investments you ever make.”
