Retirement Tips from a 37-year-old Mom

I would not say that I am officially retired, but I can tell you that I was able to quit my job pulling a heavy portion of our double income home at the age of 36, in order to finally stay home with my children - which was a long standing dream for me. My oldest was 13 when I was able to quit and my youngest, twins, were only 5. I believe that many of the financial choices we made were strong enough for my husband and me to feel comfortable taking such a leap, with me so young.

I believe any of these choices, made sooner or later, will help anyone planning for retirement, because in a sense, I have retired...for now. I may work again one day, but it will be a matter of accomplishment, rather than a financial necessity.

I wish I could say I dreamed these fine suggestions up myself and take full credit for how totally effective they've proven to be, but the truth is, each one of these tips were advise from others. History does indeed repeat itself, and often, it pays to truly heed the wiser and put in to action lessons we have not yet learned the hard way, but simply trust sound advisors.

The Mother: "Cut the Raise"

My mother has been teaching for as long as I remember. I even remember her saying, "That's just what you did in my day: a secretary, a teacher or a nurse." Today, she is nearly retired and I presume totally ready. I will never forget my first year in corporate America. I was so proud of myself after a terrible divorce and bankruptcy, recovering by getting a job and supporting two small children as a single mother all alone. I was telling her how totally excited I was about my upcoming raise.

It was then she advised that I not take the raise, but immediately allocate the money to my 401k. I innocently told her I had not allocated anything to my retirement fund - ever. I needed the money. She went on a tirade I will never forget. In fact, my dad took the phone from her and reasoned that I should at the very least be contributing to the company match point.

I had no idea what he was talking about. After this discussion, I began asking friends that were doing well in the company. It turns out, the clear and sensible choice was to match part of my own income to 401 up to what my company was matching for those who invested, which was 6%. I thought I would choke, letting go of a dollar in my pocket. My dad specifically stated, "You are turning away FREE MONEY your company is willing to give you!" So that year, I took the raise and immediately allocated all 6% to my 401k. In essence, I didn't get a raise I could see, I made the change of allocation in my 401k the week my raise was coming. I never saw a raise - that year.

Year after year, my mother would say that as a teacher, she never took her raise - and if she did, she took only a percent. In other words, the pay cycle she expected an increase due to annual review, she changed her 401 election. This way, she never missed the money. If she got 1% or 2% of the 5% it was more than she was getting before, and that was that. The rest went into savings she never saw or touched. This proved to be great advice 10 years later.

The Sister (And Dave Ramsey): "Pay off the car!"

About 5 years later, my sister went to a Dave Ramsey seminar. I had never heard of Dave Ramsey, but apparently he leads awesome seminars to financial freedom. This seminar she went to was through our church, some weekly deal, and each week she raved and raved. At the time, I couldn't afford the seminar. Week after week she would call obsessed with how stupid she was with her money. One week, I totally remember, she went on the car rampage. She was hell bent on paying off her cars - to gain financial freedom! ( To learn more about this acclaimed program, visit: http://www.daveramsey.com/)

I listened. I don't think I was sucked in just yet. But she was so passionate about not paying for cars. She said, "Dave says if you save the money you spend on a car payment, you will be a millionaire!" Of course, this included saving once the car was paid off - which I had a hard time envisioning. AND it included starting at age 30, I think. (Well, I was over 30 and we had twin infants in daycare at the time to the tune of $24,000 a year!)

But a strange caveat was that Dave suggested the average American car payments were far less than what my husband and I were paying for cars, by half! I started thinking our car payments were killing us. We began talking about downsizing our cars and actually owning them!

My husband and I had heard "a car depreciates the moment you drive it off the lot." So, we did it. We traded his car and mine. I ended up in a fire engine red Suburban for 8 years! I loved that car, as ridiculous as it was. It helped and yes, I got made fun of at work and had at least 30 minor instances of collision in that oversized durable nightmare BUT, we saved.

The Intern: "How is your Portfolio?"

Advancing in the company I was with after so many years, I had employees. But from time to time we would hire interns for this or that. I hired a very competent intern who used to work for a retirement planning agency. She and I happened to talk upon her past one day and she began telling me about "diversifying my portfolio." I didn't even know what she was talking about. In fact, it made me feel like an idiot.

So, I called Fidelity, the company who held my 401K and asked, "Do I have a diversified portfolio?" The answer was no, I had split my 401K investments in 2...50% here, 50% there, which is not considered totally diversified. I took this information back to my intern who promptly advised me to at least have 4 investments, not 2.

She also suggested that in every portfolio is the option to recalculate. Meaning, if one part of the portfolio was doing better, quarterly it would automatically recalculate - taking your % back to the set point. I didn't completely understand that, but when I asked Fidelity about it, they did. They set my account to recalculate back to the original percent quarterly - and it made me money! It was then that I realized that my 401k savings money could earn me more...than just sitting there.

I used to get statements in the mail and file them without even opening them. I had no idea my elections made a difference in HOW MUCH I could save!

If you have not sought to understand your elections, you should. Changing this up saved me more in two years than I had earned altogether in five!

Downsize: Half the Income

Okay, I had a big job. To drop my job was like dropping a lifeline, half our life - or more! So, my husband and I had a "Come to Jesus" talk if you will. We really sat down and shared our hearts on what mattered.

Strangely, many of the things we were spending the MOST money on were the things we valued the least - even hated. We hated running my son to this select team or that nightly. We hated the house we were in for sucking the life out of us. We needed to get real with what mattered. So, we made a simple list. All of it pointed to a small town, a smaller home and less pretension.

So, we began plotting a move. We didn't want to alarm the kids or family, but at night we would research crime, income, demographics...you name it. Six months we looked for a way to sustain a smaller life....and eight months later we moved.

It was not easy. Me quitting, my kids adjusting, missing family...all of it was hard. But, we spend SO much less, and we save. And 1 year later, everyone found their groove!

Back Up Plan:

Somewhere in your 30's your likely realize the true value of plan B. We provisioned for plan B by investing in a small business with some of my retirement. We opened a shaved ice stand on the beach. It seems silly maybe, but I love shaved ice. More, I KNOW it!

I would never recommend going into business in something you don't know. In fact, years ago a friend recommended the book, "Richest Man in Babylon" (by George S. Clason, Signet Books, 2008.) It was a great read. Lesson 1 was NEVER go into business in something you do not know.

For years, my husband and I contemplated opening a shaved ice stand as a 3^rd income. We love the product as a family and loved the stands by our home. We talked to owners all the time and often weighed and measured the cost vs. commitment vs. income. We never took the leap - but often thought that would be fun for us. So, in the move we determined it to be good time to go for it. We reasoned it would earn us income, if needed...and it did. I still can't believe we figured it out.

These days, I love to write- I always have. Our shaved ice stand is located right by our house, the beach and best of all, by Starbucks (with Wi-Fi) - so I write on a contractual basis in the sun...in the breeze, till my older kids relieve me after school (to earn money of their own) and I can be the stay at home mom I was born to be.

No, I am not retired, but I was able to quit a very good job by listening to others, careful planning for 10 years and a desire to do what I always wanted to do - work for myself, raise my kids and love life much younger than envisioned long, long ago when I felt so trapped.