Paying yourself first pays off
January 2, 2018 6:00 am
Nearly 20,000 federal and postal workers now have Thrift Savings Plan accounts worth $1 million or more. The vast majority did it the hard way: By regularly investing in the stock indexed C and S funds—during good times and the Great Recession—and getting the value of compounding. It's not an overnight process. The average TSP millionaire has been at it for 29 years. The government 5 percent match was a tremendous help, but the main thing—as today's guest columnist Abraham Grungold says, is to pay yourself first. Here's what a self-made millionaire says about the process:
"My career started in 1985 as a GS-9. It took me 20 years to reach the level of a GS-14.
All along the way I always paid myself first and it has certainly paid off. In 1987, I started contributing to the TSP — 15 percent of my salary in the catch-up program. I have always kept an aggressive investment approach primarily in the C and S Funds. When the market fell, I never took my foot off the accelerator. During my first 12 years of federal service, I realized paying myself first was causing me to fall short in paying my monthly expenses. During these years, I worked an additional part-time job outside of federal service. Long before my federal career, I always paid myself first by contributing to a personal IRA with Fidelity Investments. When TSP loans were allowed, I made several TSP loans over the years to finance my primary residence and my investment properties. Although financial experts advise against borrowing from your TSP, I did it because I was paying myself back and it was equivalent to the G-Fund. My strategy was that it is better to pay myself back the interest rather than paying it to a financial institution.
In November, I reached my 32nd year as a FERS employee and I have achieved all my financial goals. I am living debt free. My TSP and my personal IRA have reached levels that I could have never imagined. I am now 100 percent in the G Fund because I have reached my TSP goal and I do not need any more risk. I continue to invest my personal IRA in 100 percent equity mutual funds.
Many readers are thinking "how is this all possible? This guy must have a rich wife, and certainly cannot be doing anything for fun outside of work." Actually, my wife is not rich but her IRAs are doing very well. During our 18 years of marriage, I have always made sure she has been paying herself first. As for fun, my hobbies are golf and traveling. So far, I have traveled to 39/50 states and to many countries outside the US.
In addition to paying myself first, I have always lived on a budget, never spending more than I had in my bank account and never buying more of a house than I could afford. Living on a budget and monitoring your expenses is the biggest factor that many people do not consider. Reviewing your expenses and checking that you are getting the best price for insurance, cable and phone service was the easiest way to pay yourself first.
Now retirement is constantly on my mind. Once our teenage daughter graduates from high school, retirement will be a serious consideration. Lastly, I have been working on paying myself first in retirement. Recently, I have been developing my retirement job as a Financial Coach and focusing on educating and assisting FERS employees. I am promoting myself on LinkedIn, Yelp and on my Facebook page ("FERS Federal Employees").
Financial Success can easily be achieved, it only takes a little effort to Pay Yourself First."
Posted by: sarah_oz@yahoo.com
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