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44

CHAPTER 3

Table 3.2

Bills1

Check to myself Mortgage Payment

$100 $750

Food

$120

Car Payment

$200

Utilities

$120

Charge Cards

$300

Total

$1,590

1Incorporate paying yourself first into your monthly budget before you pay out any bills. This will help you increase your savings, as well as help you stick with your savings goals.

you do pay yourself first is to write yourself a check before paying any bills. Another good way is to have your bank account automatically debited to your investment accounts each month.

Maximize your contribution to your 401(k), 403(b), or other employer-sponsored retirement plan. Since this money comes out of your paycheck before you receive your check, you are more likely to stick with this. It is also the easiest contribution to make, since you don’t actually see the money. Money grows tax-deferred until you begin to make distributions. These contributions will also help lower your taxes because they come out of your check before taxes are taken out, thus lowering your taxable earnings. But, taxes will be due once you begin to make withdrawals. And, any withdrawals made before you are 591/2 may also be subject to a 10-percent IRS penalty.

If you are self-employed, consider starting a SEP-IRA. Through this type of account, you will be able to shelter up to 20 percent of your income until you retire. You may want to maximize this account as well, since it will grow tax-deferred.

Set up a traditional or Roth IRA and then maximize your contri- butions to these. Any money you contribute to a traditional IRA is tax-deductible on your federal income taxes. With the new changes in the tax law, you can contribute a maximum of $3000 per year to

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