Small Effort, Big Rewards

I have found that as I age, not only do I want to reap bigger results, but I want to simultaneously expel less energy to get them. Most likely this is due to realizing the shortness of life. It’s easy to believe in our twenties that adult life will last agonizingly as long as being a teenager dying to break free—especially if you’re in debt or not happy with your present circumstances—but it’s simply not true. I want things automated, I want to make acute changes that have big impacts one year, five years, and ten years down the road. Maybe I am asking too much, but so far I’ve had a great run of it.

This article isn’t about taking a machete to your finances, which is another fine way to make a large financial impact. Rather this is an article about putting in effort now to pay off for you over the years to come—smart passive savings if you will.

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  • Automate an Additional $30 a Month to Your Retirement Savings: Hopefully you are already saving a sizable amount of your income into a retirement account. How about adding just $30 per month more? Over 30 years, the estimated amount you will have saved is $34,313 from $10,800 out of your own pocket. If you have just 15 years until retirement, you will have saved $9,242 for $5,400 out of your own pocket. It sounds like a nice return on a small amount of effort and sacrifice each month, especially if you automate the savings and forget it.
  • Move Your Retirement Fund to Something with Lower Fees: It’s a very good idea to take an afternoon and figure out the amount of fees that are eating away at your nest egg each year. If they are close to or higher than 1% of your portfolio, you should definitely think about moving them to a fund with lower fees. This is because 1%+ may not seem very much when you don’t have much in a retirement account. However, over time, the 1%+ turns into a huge gap in your nest egg. Let’s go through an example with this calculator: if you have a retirement fund of $60,000 currently, and you add $5500 per year, between 0.2% and 2% in fees can equate to a $105,598.69 difference over 20 years. Wow.
  • Switch to an Interest-Bearing Checking Account: Just like small percentages can work against you over the years, they can also work for you. Each of us has a grace period before our bills are due, so why not maximize our paychecks as they sit awaiting to go out the door? You could earn several hundred dollars per year, which multiplied over ten years, could turn into thousands.
  • Fight Your Property Taxes Once: Three years ago we got the property tax bill on our new property, and were shocked to see that the appraised value of our home was raised 7% at a time when Houston properties had collectively lost 4% of value. Though fighting our property tax took a lot of documents, and two meetings with our local government board, the savings from doing so have added up. This is because they have not raised our appraised value since. I fought once, and have saved a total of $612 over three years (and who knows how many more years my initial efforts will save us money?). This is also a great thing to do right before entering retirement, as your home’s appraisal will remain the same after a certain age.

Generally speaking, time is on your side. All you have to do is make the initial effort so that you can watch your savings scale at no additional work for you.

What types of things have you done with an initial burst of effort and energy that have saved or reaped you lots of money over the years?

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