What Is a Good Credit Score?

Whether you’re looking to get a new credit card, rate-shopping for auto loans or participating in a background check for a new job, you can expect your credit score to be checked at some point in your adult life.

But what is a credit score, and what does it tell people?

Credit is essentially the mechanism that allows us to spend money today with the understanding that we’ll pay it back later—so lenders, understandably, want some assurance that we’ll make good on those payments.

That’s where credit scores come in. This three-digit number, derived from the information on your credit report, provides lenders a snapshot of your creditworthiness (or trustworthiness to pay back that money). The higher your score, the more likely you are to get approved for whatever it is you’re applying for: a new credit card, the lowest interest rate possible on a loan or even an apartment lease.

So what is a good credit score, on a scale of 300 to 850? Here’s how FICO, the most common scoring model, breaks it down:

Exceptional: 800 to 850

Very good: 740 to 799

Good: 670 to 739

Fair: 580 to 669

Poor: 579 and under

Don’t fret if you’re not at 850. The vast majority of us aren’t—and it’s not necessary, anyway. According to FICO, the national average sits at 700, and anything in the “very good” range is likely to get you the best rates available on loans. (The lower the interest rate, the less it costs to pay that money back.) On the other hand, you’ll likely need a minimum score of about 680 to qualify for most mortgage lenders.

A number of factors determine your score. Here’s how FICO weighs each one:

Your payment history (35 percent): A history of making regular, on-time payments is the most important factor.

Amount of credit owed (30 percent): Your credit-utilization ratio (i.e., how much available credit you’re using compared to your limits) is another big one. If you must carry balances, Experian suggests keeping them below 30 percent of your total available credit.

Length of credit history (15 percent): Generally speaking, the longer your credit history, the better. If you’re new to the whole credit thing, work on nailing the other factors.

Credit mix (10 percent): How diverse are your open accounts? Responsibly managing a mix of credit lines, like credit cards, mortgages or student loans, makes up one-tenth of your score.

New credit (10 percent): From FICO’s point of view, opening multiple credit lines within a short time period is a red flag, particularly if you have a short credit history.

When it comes to improving your credit score, owning your information and regularly checking in on your progress is key to success.

When it comes to improving your credit score, owning your information and regularly checking in on your progress is key to success. You can pull your credit report from each of the three credit bureaus (Experian, TransUnion and Equifax) for free every year at AnnualCreditReport.com.

If you spot an error, be sure to report it as this should boost your score.

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What’s the Difference Between Investing and Saving?

We often use the terms “saving” and “investing” interchangeably. After all, both refer to key habits you must practice in order to achieve financial success. But they’re not really the same.

Saving is setting money aside for (usually short-term) future use, separate from what you plan to spend right now. Investing is taking the money you’re saving and using it to purchase assets that you expect to pay returns over time—in other words, helping you grow your wealth.

How do you decide what money to save and what to invest?

First, you have to sort out your financial goals and determine your timelines for achieving them. Typically, you’d want to save money for goals you’d like to accomplish within a year or so. For anything that will take longer, you may be able to afford to invest the money.

Why does timeframe matter?

When you’re shooting to reach a goal soon, you want to be sure the money will be there when you need it—and saving offers the best change of that. The tradeoff for safety, though, is that money saved doesn’t tend to earn much while it sits. For example, even the highest yielding savings account right now offers a rate of just 2.39 percent, according to Bankrate. The average savings account comes with a rate of merely 0.10 percent, as of mid-January 2019. The upside: You can rest assured that the money you’ve put into the account will be there, whenever you need it.

Investing can generate greater returns—but with greater risk and ups and downs.

Investing can generate greater returns—but with greater risk and ups and downs. For example, aside from some rocky months in 2018, stocks have been on a tear in recent history—gaining 267 percent from March 2009 through December 2018. But in the last bear market (generally defined by a drop of 20 percent or more from the recent peak), the S&P 500 plummeted 56.8 percent between October 2007 and March 2009 before it began to recover.

Over the long term, though, the stock market has historically always gone up. Since its inception in 1928, the S&P has returned about 10 percent a year, on average. So if you have a long timeline for a particular financial goal, such as retirement, the idea is that there’s time to recover from the bumps along the way.

Plus, you can—and should—invest in more than just stocks, like bonds, real estate and, of course, cash. That way some of your holdings have a chance to increase even as others might drop, and investing can continue to help you meet your goals no matter what any one investment does.

And I have to save and invest?

If you want to be financially healthy. You need some savings on hand to at least cover yourself in an emergency. Most experts advise people to have three to six months’ worth of expenses squirreled away in an emergency fund. And even as you work to save for the short term, you also want to invest for the long term to maximize the time that money has to grow. The best chance to set yourself up financially is to get in the habit of consistently saving and investing.

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Wealthy People

Read Daily – Set Goals – Compliment – Embrace Change – Forgive – Talk About Ideas – Continuously Learn – Take Responsibility For Their Failures

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This Is The Beginning of Everything You Have Always Wanted!

9 Rules For A Better Life

  1.  NEVER GO MORE THAN 3 DAYS WITHOUT EXERCISE.
  2. WAKE UP EARLY.
  3. MAKE TIME TO READ EVERY DAY.
  4. WORK HARDER THAN YOU DID YESTERDAY.
  5. THINK LESS.
  6. GIVE MORE TO PEOPLE.
  7. SPEND TIME WITH YOUR FAMILY.
  8. SMILE MORE.
  9. START A BUSINESS THAT HELPS OTHERS.                                                      understandingmoneypays.com                                                                        WILL SHOW YOU HOW!         

Save $22K? Pay Off $6K in Debt? How 3 People Hit Big Money Goals in One Year

The beginning of a new year has a way of putting things in perspective. It’s a time for looking back, reflecting on what we’ve accomplished and deciding what we want to do in the coming year. In that spirit, a new Fidelity Investments survey has revealed 2019’s top three financial resolutions: Save morepay down debtspend less. (No surprises there.)

Big goals can feel even bigger from the starting line, so let these stories of how people crossed those money goals off their 2018 lists inspire you to take the first step. 

“I wiped out the last $6,000 of my student loans.”

Ashleigh, 37, a blogger in Knoxville, Tenn.

“At the beginning of this year, I had $6,000 of student loans left to pay. After a decade of teaching, I’d spent the last two years as a stay-at-home mom, and wasn’t making as much progress on my debt as I wanted. If we continued making the minimum payments, it’d take another two years before we’d be debt-free.

I was itching to get there faster after I realized how much money I was throwing away on interest (7.25 percent really adds up!), so I started brainstorming better options.

My biggest wins were figuring out how to make money from my blog through ads—which helped me increase my after-tax income from $320 per month to $1,400 just 10 months later—as well as meal-planning and eating at home more often. That alone now saves us $300 per month, compared to our old habits. My husband Ryan even sold his Toyota 4Runner and bought a used car using $2,500 from our savings, eliminating his $250 monthly car payment. These moves required some ramp-up time, and a few sacrifices, but have been well worth the payoff.

I made my last student loan payment in October and feel an overwhelming sense of freedom. We’ve since redirected my loan payments to our emergency fund and retirement accounts.”

“We slashed our spending by 19 percent in pursuit of a huge passion project.”

Evan Sutherland, 27, and Nikayla Sutherland, 25, online business owners in Pullman, Wash.

“2018 was a huge year. Nikayla and I had finally launched a business we’d been working on for months. We went all in to make it grow as quickly as possible—which included me dropping out of grad school and her saying so long to a sonography career.

Extreme, I know, but we’d realized that 50-hour workweeks for the next 40 years wasn’t for us anymore. We craved purpose and passion, which fueled the idea for our business: an online course that teaches people how to budget successfully

Since we weren’t yet generating income, we began living off our savings (which was in good shape from years of prioritizing building it up). Every dollar mattered, so even though we were already living pretty frugally, all unnecessary expenses went out the window—from a spending a few bucks on coffee to video game splurges.

Living on the bare minimum definitely isn’t glamorous or easy, but we’ve been buoyed by the fact that we’re working toward something special—so we keep chugging. All told, we reduced our spending by 19 percent last year, mostly by keeping the status quo: I’ve worn the same pair of shoes for two years, get hair cuts as infrequently as possible and usually stick with the same simple (and cheap) menu every day. We also try to optimize our electricity usage for the season, which shaved 30 percent off our average bill. Entertainment consists of playing games together at home or watching Netflix.

These sacrifices are paying off. Our business is now bringing in enough to cover half of our expenses, and our savings account is healthy enough that we’re not worried about running out before our monthly income sustains us.

Once we’re there, we’ll probably loosen the reins a little bit, but there are some frugal habits we’ll definitely keep up. Taking long walks together and playing games for fun isn’t just free—it’s also an opportunity to connect. Pulling back our entertainment spending has taught us to appreciate just being with each other.

Despite the challenges, this experience has been the greatest of our lives. We’re building a business we’re passionate about, and the harder we work, the more we’ll ultimately earn. That’s all the motivation we need.”

“I saved $22,000, thanks to couponing, credit card rewards and side gigs.”

Alexandra Tran, 34, a marketing strategist in Seattle, Wash.

“One of my 2018 New Year’s resolutions was to significantly up my savings rate. I already had good money habits, like funding my Individual Retirement Account (IRA) and other long-term savings and keeping my expenses low. (My mortgage is just 14 percent of my income, for example.) But I’ve got my eye on early retirement in about 10 years, so I really wanted to challenge myself. So I set an intention to sock away about a quarter of my $80,000 salary—and ended the year with $22,000 more in savings.

I started with some easy wins, like shopping less and limiting myself to one of everything (i.e., one black jacket instead of two styles). I also scaled back entertainment spending—skipping the movie theatre in favor of Netflix and volunteering at special events (which cost as much as $300 a head!) to gain free entry. These moves didn’t add up to much regular savings, but they got me in the mindset to consider how every dollar counted toward my goal.

Next, I looked for simple ways to maximize everyday financial moves. For example, I took advantage of my bank’s offer of $200 for moving some cash into a money market account. And I got strategic with credit card rewards and coupons.

I have a few cards that offer 2 to 5 percent cash back on rotating categories (like groceries and gas), and I charge everything—from transportation costs to utilities, food, pet supplies and even my mortgage. I use an app called Debitize, which automatically earmarks cash from my checking account to cover my credit card purchases. This way, I don’t accidentally overspend or revolve credit card debt.

I also scour weekly supermarket specials and time necessary shopping around big sales at outlet malls. Stacking coupons on top of in-store discounts—and paying with cash-back cards—has gotten me up to 80 percent off before. Overall, I’ve whittled down my $150 weekly grocery bill to about $40.

My most effective move, by far, was finding ways to earn more. I recently began renting out my guest room to students for $700 per month—easy, passive income. I’ve also downsized my belongings by as much as 60 percent. As a former impulse shopper, I had a lot of nice clothes and home goods that I wouldn’t miss, so I sold them on sites like Poshmark and Mercari, raking in thousands (and the lion’s share of my savings for the year).

Offloading unwanted stuff online may not be a sustainable savings trick, but it took the pressure off needing to find more ways to cut back and helped me leapfrog toward my big savings goal. There’s a psychological benefit, too: Letting go of material things that don’t serve me in favor of a bigger savings balance actually felt great.”

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8 Ways to Avoid Paying Full Price for Any Holiday Gifts

Got an extra $638 laying around that you won’t miss? Yeah, me neither. Yet that’s how much the average American will spend on holiday gifts this year.

The good news is we don’t have to be average. Avoid paying full price and it’s a lot easier to trim holiday spending. Here are eight ways to do that without compromising on the gifts.

1. Go for discounted gift cards.

On sites like GiftCardGranny and GiftCards.com, double-digit discounts on gift cards for GameStop, Nordstrom and Urban Outfitters are easy to find. Use the discounted cards to buy gifts—or gift the cards themselves. Americans have ranked gift cards the #1 most popular wish list item for 12 years in row in National Retail Foundation’s annual holiday survey.

2. Sign up for the list.

To attract new customers, some retailers offer discounts for your first online purchase. For example, you can get 15 percent off and free shipping at Kate Spade, 15 percent off at Kohl’s and 10 percent off from Dicks Sporting Goods simply by signing up for the brands’ newsletters.

If you stay on the list, you can potentially score even better deals. Victoria’s Secret sends special promotions twice a day to its email subscribers, and Bed, Bath & Beyond sends coupons for $5-$15 every month.

3. Abandon your cart.

When online shopping, try leaving items in your virtual shopping cart overnight. For some retailers, like Bonobos, that triggers a “you forgot something” email, where they may offer an extra discount to motivate shoppers to complete their purchase.

4. Get social.

Local brands in particular are likely to offer exclusive deals to their social media fans, says Chelsea Hudson of TopCashBack.com—so follow your favorite stores on Instagram, Twitter or Facebook for an inside scoop on flash sales, promo codes and giveaways. Bloggers and social media “influencers” partner with brands and share their own promo codes with followers, too.

5. Forget brand loyalty.

In many cases, the gift you’re looking for is sold at a bunch of different retailers—so do a little research before buying to ensure you’re paying the lowest price. If you’re in store, swing by the customer service desk; they’ll often price-match what you find online to convince you to buy an item right then.

If you’re in store, swing by the customer service desk; they’ll often price-match what you find online to convince you to buy an item right then.

6. Refer a friend.

At clothing line Boden, refer a friend for a $15 coupon, and your friend will get 20 percent off their first purchase, too. At shoe company Rothy’s and Rebecca Minkoff, referring a pal will get you each $20 to spend, and UNIQLO will give you both $10.

7. Watch for price drops.

If you’re looking for a specific item but can’t find a coupon or sale, tools like Savelist, CamelCamelCamel (for Amazon items) and SlickDeals’ alerts will keep track of prices and notify you when a new deal is posted.

8. Negotiate.

If you don’t ask, you won’t get. Some (usually smaller) businesses may offer a discount for paying in cash, so they can avoid paying fees levied by credit card issuers. And in secondhand stores or on resell marketplaces, like eBay and Poshmark, asking the seller directly if they’re willing to lower a price is likely to save at least a small amount.

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10 Things To Do the First 10 Minutes of Your Day

Wanna have a great day today and every day? Get a great start. It’s easy to set a positive and productive tone if you do (or avoid doing) some key things first thing in the morning. C’mon, it only takes 10 minutes.

1. Don’t hit snooze — Getting a late start only leads to morning stress so when that alarm goes off, try try try to get your feet on the floor the first time.

→ How to Avoid Hitting Snooze in the Morning

2. Write something down — Did you have any good ideas or dreams while you were asleep? Get ’em down right away. Your relaxed, sleeping brain is open to ideas that you might not come up with while preoccupied with daytime activities so take advantage of any flashes of genius you have.

→ The Simple Secret to Cultivating Creative Thinking

3. Forget yesterday, focus on today — Still stressed about things that happened yesterday? Why? You can’t change it so let it go.

(Image credit: Monica Wang)

4. Think of something you’re grateful for/ excited about — There’s always something to look forward to.

5. Leave your phone alone — Do yourself a favor and log at least 10 minutes of life sans screen time first thing in the morning. You can still check the weather, your email and the news, just don’t do it while lying in bed.

→ Tech Disconnect: I’m Banishing My Phone from My Bedside

6. Drink a glass of water — It never hurts to be hydrated so get a jump start on your daily water intake first thing.

→ I Got Healthier This Summer in 10 Seconds a Day

(Image credit: Alexis Buryk)

7. Get some natural light — Throw open those curtains right away! Getting a little sun will make your brain wake up and realize it’s time to function. Waking up in the dark on these long winter mornings? Take a mid-morning walk, open a window and do your best to get a little light. It’ll perk you right up.

8. Stretch — Get your blood flowing with a little light stretching.

9. Make the bed — It’s not only us, science says making your bed will make your whole day better.

→ Make Your Bed! For Productivity, Profit and Peace

10. Do something you don’t want to (and cross it off your list) — Dreading doing a chore you hate is so much worse than actually doing it. Get it out of the way right away and free up that mental energy.

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From Six Figures in Debt to Six Figures in the Bank: How They Did It

Staring down any amount of debt can feel overwhelming. But when it’s in the six figures, it can be hard to imagine even getting back to zero, much less building up your savings, too.

If you’re looking at a mountain of debt, let these stories inspire you. The three couples below not only paid down six figures of debt, but now have a net worth in the six figures. Here’s how they did it.

“Two years ago, we had $107K of student loans. Today, our net worth is nearly $150K.”

John, 30, and Rachel M., 27, U.S. Coast Guard officer and stay-at-home mom in Cape Cod, Mass.

“When my wife and I tallied up our student loans in 2015, we learned we were more than $107,000 in the hole. We knew we needed to do something—fast. The idea that making some big changes in the way we managed money today could lead to financial freedom in the future was the motivation we needed.

Getting started: We started tracking our spending carefully, which highlighted wasteful expenses that we eliminated. We went on fewer trips, stopped buying expensive groceries, gave up alcohol and put off big purchases we wanted, like a boat. With some work, we were able to set aside about 50 percent of our low six-figure income—and upped that percentage even more when we got raises.

We also picked up side jobs: Rachel sold handmade items on Etsy and I started a landscaping business, which brought in a few hundred extra per month. Eventually, we were contributing an average of $3,500 per month toward our loans.

We didn’t put every extra penny toward debt, though. It was important to us to work toward a positive net worth at the same time as we lowered our debt, so we invested. After about eight months of aggressively paying down debt, we began prioritizing our retirement contributions, ultimately maxing out our employer-sponsored plans and IRAs.

Crossing the finish line: In just about two years, we’ve wiped out about $80,000 of student loans, which has freed up a ton of money. Not only does that allow us to invest more, but it’s given my wife the freedom to stay home with our newborn.

We do still have about $23,000 of debt to pay. But since the interest rate is about 3 percent, we’ve consciously slowed our progress in order to make our money work harder for us in the stock market. Today, our assets exceed $170,000—about $142,000 in retirement accounts, $26,000 in regular investment accounts and a small cash emergency fund—and we’re looking forward to growing it.

Their advice for others: Learn how to invest—you owe it to yourself! It’s the best way to build long-term wealth.”

Downsizing to a tiny home helped us wipe out $200K of debt.”

Claudia, 32, and Garrett Pennington, 35, a marketing specialist and sales specialist in Lancaster County, Penn.

“Our debt ‘aha’ moment was realizing we couldn’t pay off $16,000 of debt before the no-interest period on our credit card expired back in April 2015. We knew then we needed to turn our finances around.

We started by putting everything on paper. It was shocking to see all our debts in black and white, but it was also a relief to finally face it. In addition to the credit card debt, we had $36,000 in student loans and a $156,000 mortgage. (I know most people don’t consider mortgages “bad debt,” but we’d spent thousands remodeling a home we didn’t love and were overwhelmed by how long it’d take to own outright.)

Our net worth was somewhat offset by a small cash savings and some retirement funds—but we were essentially starting from scratch.

Getting started: We ruthlessly slashed daily expenses and put our home on the market—eventually eliminating the $1,000 mortgage payment—and put 10 percent down on a $70,000, 500-square-foot tiny home. We donated or sold about 80 percent of our stuff, earning hundreds from Craigslist buyers—all of which went toward debt.

We also substantially increased our incomes. I left my part-time nonprofit job for a full-time marketing gig—doubling my salary. We also began an SEO consulting business, which brought in $1,700 per month in its first year alone.

Thanks to the one-two punch of cutting costs and making more, we made massive monthly payments—anywhere from $900 to $7,000 per month.

Crossing the finish line: We paid off our credit card debt within six months, then started aggressively paying off our new mortgage. By November 2016, we owned our tiny home outright. That freed up enough cash to zero out the rest of our loans—and finish paying off all our debt—by March 2017.

My one regret during this time is not saving, which I admit is risky, or investing more. But since being debt-free, we’ve been saving and investing thousands per month. Our net worth now exceeds $100,000—between our home, retirement investments and cash—and we’re working toward our next lofty goal: financial freedom. For us, that means creating passive income streams that cover our annual expenses.

Their advice for others: Set SMART goals, which are specific, measurable, actionable, realistic and time-bound. Knowing where you want to go will make it easier to create a plan to cut expenses and increase income.”

“Realizing we couldn’t afford a family vacation, thanks to $109K of debt, was our wake-up call.”

Brian, 47, and Lynn Brandow, 46, IT project manager and retail associate in Long Island, N.Y.

“Back in 2010, Lynn and I were planning a family vacation. But when I tried to swipe our five credit cards, we didn’t have enough credit available to pay for the trip. I asked the banks to increase my credit limits without any luck.

Though this was our rock bottom, it gave us the motivation to start learning about good money management and how to pay down our $109,000 of credit card debt. While we had some retirement savings at the time, we also had an underwater mortgage—so we had our work cut out for us.

Getting started: Our first step was creating a lean budget and cutting back on things like eating out and entertainment. Lynn also went back to work as a part-time retail associate, earning $600 to $800 per month.

We ultimately utilized a free debt management program through our credit union, which helped us negotiate reduced or waived interest rates. This didn’t discharge any debt, but getting a break here was an incredible springboard to begin repaying debt.

Crossing the finish line: Over the next four years, we funneled as much as $2,200 a month, or about 30 percent of our take-home pay, toward our credit card debt. (We also built up a small emergency fund of $1,000.) By September 2014, we’d paid it all off.

Debt freedom has brought our family peace of mind. Lynn and I continue to regularly communicate about money, which is an important part of being good financial role models for our kids.

Now we’re focusing on building our wealth. Our net worth is currently $366,000 between retirement accounts, cash, cars and our home (which is no longer under water). Every dollar we put toward debt is now saved or invested.

Their advice for others: Define your ‘why.’ Ours was to better provide for our kids, travel more, share experiences and build memories as a family. Keeping this in mind made it easier to take the necessary steps to dump our debt.”

How to Save $1 Million By Retirement on a Five-Figure Salary

You’ve probably heard that you’ll need $1 million to retire. You’ve probably also thought that sounded pretty close to impossible—especially if you only have a little saved, or, maybe, nothing at all.

If you are in your 20s or 30s, there’s good news. You have an amazing—but easy-to-waste—advantage when it comes to investing for retirement: time. Thanks to compounding returns (when your investment returns start generating returns and so on), money socked away early has the chance to grow exponentially.

But even if you’re older than that, it’s not too late to benefit from compounding. The most important thing is to start investing, even if you don’t have much to invest yet.

The Benefit of Starting to Invest in Your 20s

Let’s say you’re 25, and haven’t started investing yet, but land a job earning $55,000 (not far below the median income for householders between 25 and 34 years old, which was $62,294 in 2017). Better still, you’re eligible for a nice 401(k) benefit: Your employer matches 50 cents of every dollar you contribute, up to 6 percent of your salary. So you enroll and contribute 6 percent. (Of course you do; it’s free money!) That means you’re investing about $275 pre-tax money per month, and your employer kicks in $137.

Stay the course throughout your career, investing 6 percent of your salary, and you’ll be a millionaire by age 60. And by 65, you’ll have $1.5 million!

But let’s back up. This example is based on a host of assumptions. The first is that you are earning $55,000—which you may not be by 25. If you make less than that, you’ll need to set aside a little more each month or invest for a longer period of time. The example also assumes you get a 3 percent raise each year, and increase your 401(k) contributions accordingly—and that you average 7 percent annual returns from your investments, which is a fair estimate for stock market returns over a long stretch.

Even if those assumptions apply to you, a $1 million prize at the end may still seem too good to be true, especially in the early years, when growth seems paltry. After year one, you’d have only about $5,100 (including your employer match). By 29, you’d have about $31,000. But things accelerate in your late 30s. At 36, you’ll have crossed the six-figure mark; at 46, you’ll have more than $300,000, and by 51, more than half a million.

Better yet, to get there, you’d only have to contribute about $256,000. (Your employer will contribute half that, or $128,000.) Compounding takes care of the rest.

Even if this example doesn’t match your exact situation, it demonstrates the power of investing early, and regularly, and sticking with it so you can reap the benefits of compounding returns. But it’s not too late to hit that $1-million mark if your 20s are behind you.

What to Keep in Mind if You Start Investing in Your 30s

Let’s say you, like many Americans, reach your 30th birthday and haven’t started saving for retirement. Using the same assumptions, you still have time to reach $1 million by the time you’re ready to stop working—but you’ll be 65 instead of 60, like the early saver.

After 30, however, things get trickier. Someone who waits until age 35 would only have $665,000 by age 65. But there’s always hope, and it’s truly never too late to start growing wealth; it’ll just cost you a little more to catch up. Nudge that 6 percent contribution up to 10 percent, and that 35 year old would get to $961,000 by age 65 (and more than $1 million just a year later, by 66).

How to Have Enough by Retirement Without an Employer Match

So far, we’ve assumed that each investor has the benefit of both an employer-sponsored retirement account (and one-third of non-unionized American workers don’t) and a generous match (which about a quarter of employers with 401(k)s don’t offer). Remove the 3-percent match from our first example, and the person who started at 25 years old would still have $1 million by 65.

You can also become a millionaire by 65 by investing $4,700 per year in your own Individual Retirement Account, which is accessible to anyone who’s earned income in a given year. That’s 8.5 percent of a $55,000 salary, but it would become less as you earn more over time.

In other words, becoming a millionaire is not impossible, even if an employer isn’t helping you out. But it bears repeating: Investing early is key. Starting at 35 in the above scenario means you’d have $475,000 by 65. Maxing out the IRA—the current limits are $5,500 per year, or $6,500 if you’re 50 or older—would still only yield about $580,000 come retirement time.

Sure, rent, debt and all your other bills could make putting aside several hundred a month a little daunting. But remember, depending on the type of account you have, your contributions could be pre-tax, meaning you won’t feel it as much in your take-home pay.

And even if it requires some sacrifice now to get there, the payoff of being in good financial shape (even if you don’t quite hit $1 million) by the time you want to stop working should be worth it.

This article was updated on Sept. 27, 2018

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