Accepting Level 3 Payments

If you are successful or plan to become successful, this article is for you. Why? Because we talk about percentages. Percentages is the method that successful people use for measuring results. Again – why? Initially, because it’s rude to talk raw numbers in front of people you don’t know well. Talking in percentages still gets your message across – without making the other person intimidated. But more importantly, it’s because your income will keep growing and growing and setting fixed numbers just isn’t going to work. Finally — percentage-base budgets allow for measured lifestyle inflation. And that… means fun without guilt.

This form of budgeting means that as your income grows, so does the dollar value inside your budget. More money goes towards spending, more money into savings and of course – more money into investing.

Though many people have a hard time remembering to increase their investments. After all — life is good. It’s hard to think about retirement when life is currently so fantastic.

The following article gives strategies for how to include investing into your percentage-based budget. The idea is that you’ll never again need to worry about whether or not you’re investing enough. And fear not. Even if you’re a freelancer (or plan on becoming one), these investment vehicles are still available to you.

What percentage is the right percentage?

How much should you invest? As much as it pains me to not give you a definitive answer — I cannot. It depends on your goals. Want to retire early? Invest 50% of your income. Want to buy a yacht and work a few more years – invest less. Though many financial advisors will tell you to invest anywhere from 2-10% of your net income.

This means if you net $100,000 per year, you’ll invest $10,000. If you earn $1,000,000 you’ll invest $100,000.

What’s important is that you find a percentage that works for you. Because it’s at this moment when you can either create a budget that works – or a budget that doesn’t. What type of budget works – an easy one. Since no one can harness will power all of the time, a budget needs to be reliable. You shouldn’t be constantly second guessing things…

401(k)

How much of your pay would you like allocated towards retirement? Luckily, this is done as a percentage. Many companies will match the amount you contribute up to a certain percent. A few percentage points is typical. The top 15% of companies match six percent or more.

Since you never see this money – it’s easy to go ahead and invest. However, our discussion of a percentage-based budget cannot stop here. That’s because, in 2017, if you’re under 50 years of age, the most you can contribute is $18,000. If you’re 50 or above, you can contribute $24,000. Let’s see where else you can tuck away your money.

IRA/Roth IRA

Putting money into a Roth IRA is a fantastic option. The money you put in has already been taxed and can be withdrawn for retirement purposes without more taxation. A regular IRA doesn’t have the same tax benefit.

Keep in mind there are limits for how much a person can contribute per year. If you are under 50, you can contribute $5,500 per year. If you’re 50 or older, that number increases to $6,500 per annum.

These are the total numbers between both your IRA and Roth IRA. So, no, you cannot open both types of accounts and double your contributions. Smart thinking though.

The IRA and Roth IRA are merely loosely tied to your income. To be specific, you simply have to prove you’ve earned at least the amount you’ve contributed that year. Very simple.

Since these investment vehicles aren’t tied directly to your income, it’s harder to associate them with a percentage of your budget. But these numbers are still important because they show you how much you can contribute to this other retirement vehicle. Because when setting a budget to invest, you don’t want to invest so much that your assets aren’t being protected. You want to make sure your invested income still has a safe place to go. If you begin hitting the ceilings of all types of investment accounts — you either need to get creative by opening up more and more of them or you need to consider alternative investments such as real estate.

William Lipovsky owns the personal finance website First Quarter Finance. His most embarrassing moment was telling a Microsoft executive, "I'll just Google it."

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