Happy Mardi Gras to all! For those who aren’t familiar with this raging holiday, Mardi Gras is french for Fat Tuesday. Excluding the exchange of beads, there is a lesson to be learned here…Fat Tuesday refers to the practice of the last night of eating richer before the ritual fasting of Lent. I’m assuming whoever originated this grand event read my earlier blog post about not eating out.
To keep things financially focused, I’m thinking of renaming today:
“Fat (Wallet) Tuesday”
To celebrate, I’m going to hit you with a saving/budgeting tip. Unless you are self-employed, I would say most Americans are paid bi-weekly (every other Friday). If you are self-employed, you are probably putting away money for taxes, and you can easily calculate what you need to save based on your income using personal tax software, or a tax advisor can give you a game plan to help you save accordingly. If you are paid bi-weekly, then most likely you budget everything around the 2 paychecks you receive each month. Since there are 26 pay periods each year, that leaves 2 months where you receive 3 paychecks (usually falling in March/September). Let’s assume you’re in the 40k/year range. Every 2 weeks, after tax, you’re bringing home around $1200. If you budget for 2 paychecks each month, this extra $2400 ($1200-March $1200-September) should go straight to savings.
Secondly, the average tax return for adults is $3000. This obviously is contingent on marital status and claimed dependents (are you married or do you have kids?) but we’re playing averages here. Again, if you’re budgeting off 2 paychecks each month, this $3000 present between January and April should go untouched.
Now what do I with this $5k I just saved?
If you haven’t done so already, open a Roth IRA! I will cover this in more detail soon, but all you need to know is that the maximum contribution each year is $5k. Coincidentally, you have an extra $5k in your savings!?! Funny how that worked out…
