THE MONEY MINUTE: Do you work 9 – 5 for free?

by Jac M. Arbour CFP®, ChFC®, President
J.M. Arbour Wealth Management

Many people who earn a paycheck have never been paid. Sounds a little crazy, right?

When you hold your paycheck in your hand or view your electronic deposit, I’d like you to consider that the amount you see doesn’t represent what you actually earned. By this point, the amount you see has already had taxes deducted and the remainder will now go to pay for things such as your mortgage or rent, your electricity, water, sewer, cell phone, internet, cable, property tax, heating and cooling, your automobile, groceries, etc. When all of this is paid, how much remains for you? Do you get to keep any of it? If the answer is no, then YOU are not being paid.

Consider redefining what you are “paid” as what you “get to keep.” Consider opening an account for yourself that is earmarked for the “future you”—the person who might have a financial emergency someday and need cash or the future version of yourself who wants to retire with a solid nest egg. Either way, you are the person who determines your future capacity in both of these situations and many others.

If you have debt, consider the interest rates and terms of that debt and decide the best way to eliminate it. While eliminating debt, consider building an emergency fund equal to six to twelve months of expenses. After that, it’s time to start one or more investment accounts. Remember, you don’t need to invest much each month; it is amazing how a little bit of money over a long period of time can turn into something truly significant.

When you invest money in an IRA (Individual Retirement Account), 401(k), 403(b), TSP (Thrift Savings Plan), or some other pre-tax investment account, you are investing money before Uncle Sam gets his share. This is what I call paying yourself first. Before anyone, anything, or any monthly bill touches your paycheck, you put some away for yourself. Trust me: you’ll thank yourself later.

If you have questions about strategies to accomplish such goals, please reach out to one of the professionals at JMA or consult an advisor who has a fiduciary responsibility to you.

See you all next month.

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.