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Not long after you accept a job offer, the onboarding process starts. A lot needs your attention right away: There are documents to fill out, people to meet, systems to get logged into, etc.

What you’re really concerned about is getting proficient at your job as soon as possible. You’re probably not all that concerned about setting up your 401(k) plan, one of the most valuable benefits in your entire compensation package. Our research shows barely 5 percent of new hires regard it as a priority item. Many even put off paying attention to their 401(k)s for months or years.

Although it doesn’t get talked about as much, managing the financial dimension of your career is just as important as managing the vocational and psychological dimensions. A 401(k) is one of the most effective ways to accumulate wealth over your prime working years, and the 401(k) basics are a lot easier than most people think.

We sat down with Ilyce Glink, CEO of Best Money Moves and one of the most renowned experts in the area of personal finance. We asked her, “How do you get over the inertia of doing nothing with your 401(k)?”

Her advice was masterly: “Inertia is a very powerful force. Turn it around and make it work for you.”

To help you do that, Glink sets out three guidelines for understanding the 401(k) basics:

Guideline No. 1: If It’s Not in Your Pocket, You Won’t Spend It

In other words, having a substantial sum of cash just sitting around isn’t necessarily a good thing.

As Glink explains, “The biggest mistake people make in managing their money is looking at their account balance at the end of the month and concluding that having something left over means they are saving. That’s the wrong kind of inertia.”

Glink notes that just as businesses manage working capital carefully, so should individuals: “The money that doesn’t need to be in your pocket should be compounding. That’s how you make inertia work for you.”

Glink points out that although most everyone has heard about compounding, they often don’t think about it correctly: “Getting in the habit of saving early means that, over your career lifetime, you’ll actually have to save less to earn the same result [you would] if you started saving when older.”

For example, Glink explains, if you invested $2000 per year in an index fund or equivalent during the ages 25 through 35 and then never added any additional funds after that, you would still retire with more money than if you started at age 35 and invested the same way for the rest of your career.

Guideline No. 2: Avoid Money Leakage

While compounding is the greatest direct benefit of a 401(k), its ability to control money leakage is perhaps its greatest indirect benefit.

“Money leakage — spending money thoughtlessly — is the biggest obstacle to building up enough funds to cover a big expense, like retirement,” Glink says. “Just because you always have a full tank doesn’t mean you have to be driving fast all the time.”

By contributing the maximum to your 401(k), you transfer some of your liquid funds at risk for leakage to an investment vehicle that lowers your current tax basis and is not taxable until you make a withdrawal.

“All your money grows faster over time because your tax liability is lowered, and you aren’t spending that money,” Glink says. “That’s the fundamental principle to accumulating wealth.”

Glink advises everyone to set up a 401(k) plan as early in their careers as possible and always when beginning a new job. Choose the option that is closest to the stock market index, and then max out your contribution.

“Your company has done most of the heavy lifting,” Glink says. “Let them do the management part. Your job is to contribute.”

If no qualified retirement plant is mentioned during compensation discussions, and you don’t see any related paperwork during your onboarding process, it’s best to directly ask whether the company provides such a plan and whether it matches contributions.

Guideline No. 3: Don’t Spend Your Whole Work Life Trying to Save for Retirement

Contributing to your 401(k) is a powerful way to build a retirement fund, but life up until you retire will be full of competing priorities, and you need to be ready to meet them. The idea is to leave the 401(k) alone, with the exception of contributing regularly.

For example, if you are trying to save for a down payment on a house, Glink advises you “still contribute the maximum to your 401(k) and cut back on spending to fund the down payment.”

Another common example is shifting around your asset allocation in order to maximize overall return. Glink advises those earlier in their careers not to worry excessively about it: “If you are younger, use index funds, which are fully diversified. As you get older, then you will likely consider other investments, such as adding bond funds to equities.”

Even for those who have mastered the 401(k) basics, life remains no less busy, and it is easy to put off money management altogether. Circling back to our original question, Glink had some wise words about getting past the inertia of money management.

“Make a list of all your money tasks, and do one thing a week,” she explains. “Rarely does anything need to be done immediately, so do the thing you least want to do first. It takes time and effort to build up a muscle memory of managing money, so the sooner you get started the better. Remember, it’s not just the money. It’s the habit of doing something every month to support your financial future.”

LiveCareer develops tools to help job seekers draft cover letters, prepare for interviews, and build targeted resumes via its resume builder and an extensive collection of resume templates.



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