Generation 42

With Judy, as with the rest of us, it is not the amount of money earned that is important. It is how much of that she does not have to give to the IRS, how much she really does get to keep.
Money that goes into a retirement fund is money you do not have to pay taxes on until you take it out. Depending on your income tax bracket, you might be able to keep 28 percent more of your money right off the top. Because of the tax savings, contributing the maximum to your retirement account right now will not deprive you of as much current income as you might fear. And where it will make a vast
difference is in what you’ll have to spend later.
Let’s say that I convinced Judy to raise her 401(k) contribution to $500 a month or $6,000 a year, and let’s say, too, that she is in the 28 percent tax bracket for federal taxes and the 11 percent bracket for state taxes. She will have saved $140 a month on her federal taxes and $55 a month on her state taxes. If she didn’t put this money away, she would really get to spend only $305 a month after paying her taxes.
Your situation might be a little different, depending on what tax bracket you are in or whether the state you live in imposes an income tax, but the concept always holds true.
Finally I convinced her, and she promised to up her contribution to the maximum that very week, which she did. She called me a few days later: the very day she raised her contribution, her boss had called her into her office to give her a midyear raise. This was the first time in all these years she had been given a raise before the end of the year. She was stunned.
I wasn’t. This sort of occurrence, however you want to explain it, is not uncommon; I’ve seen it happen many times. I attribute it to the second law of financial freedom: Respect attracts money.
Judy had decided to respect herself, chosen to put the creed into action and take the steps to nurture her money. And by doing the right things with her money, she attracts more money.

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