How To Be Your Own 401k Plan

What if you thought about yourself as your own 401K plan, and risked your money on yourself instead of the stock market?  Think about it.  Everybody tells you to maximize your 401K contribution to ensure you have enough money for our retirement.  But what if you took the same money you were going to put into our 401K plan, and risked it on yourself instead?

I’m not saying you shouldn’t save for retirement, and I won’t make financial arguments, pro or con, on 401K plans.  Those can be made by financial advisors, journalists, and others.  And I even acknowledge there are no more employer provided pension plan, and social security is becoming less secure, so some retirement planning is still required.

When you put money into a 401k plan, it often goes into a mutual fund.  Then you must trust a person you’ve never met (the fund manager) to buy stocks in hundreds of companies you may know nothing about and can’t control, and pay fees to the fund and fund manager.

But, what if you took the money you would have invested and instead opened the business you’ve always dreamed of?  What if you used that money to take additional classes to increase your skills and give yourself an opportunity for a promotion and a raise?  These might actually increase your retirement savings more than just putting part of your current wages into a 401k.

For instance, if you saved $5,000 per year for 20 years and it grew at 6%, you would have $194,000.  But, if you invested money in schooling or other skills resulting in a $10,000 increase in your salary (yes, this is possible) and then your salary increases at 2.5% each year, you would have $245,000 at the end of 20 years, $50,000 more than by putting money into your 401k.

This financial reason might be good enough.  But the best reason to invest in yourself: It gives you control over your money and your life.  You decide what to do with your money.  When to invest it.  What to spend it on.  How to create the life you want.  Most fundamentally, you risk your money on the one thing you know best – yourself
401k risk
Why This Matters – This is just one example of how we sometimes allow other people control our future instead of taking chances on ourselves.  We think that others are wiser than we are.  We believe if we put our fate in someone else’s hands, we will succeed.

Now Do This – Think about a recent risk you took.  Did you risk it on yourself where you could personally evaluate the pro an cons of the situation?  Or did someone else control the risk?  Most importantly, did the decision you made increase or decrease the control you have over your life?  Tell me all about it.  I want to hear and learn, and I know my readers do as well.

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