I’m a Six Figure Earner — How I Budget To Max Out My 401(k)
Written by
Laura Bogart
Edited by
Kristen Mae
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Anyone who’s ever even glanced at an article about budgeting for retirement has likely encountered the term “maxed out my 401(k).” While the phrase “maxed out” is usually something you’d want to avoid with credit cards, it’s actually a great goal for your retirement account — it means you’ve contributed the maximum amount allowed for the year.
Okay, that sounds like a lot of money. Maybe an impossibly large amount. But it doesn’t have to be if you strategize your budget. Social media personality Mckenzie Mack, who has devoted her platform to sharing financial advice, detailed exactly how she budgets to max out her 401(k) on the salary she earns as a project manager.
Using a typical take-home paycheck of $2,658.35, Mack broke down her budget in a way everyone can learn from.
Budget Monthly Instead of by Paycheck
It’s tempting to view your wealth only in terms of your paycheck, but Mack wants you to get in the habit of budgeting monthly instead of biweekly. She ensures her checking account always holds a month’s worth of expenses, so she never has to worry about the bills due in the next two weeks.
Knowing her monthly expenses are covered gives Mack the freedom to be ambitious with her savings goals, looking to contribute as much as possible to her 401(k), Health Savings Account (HSA), and other investments.
Track Every Dollar In and Out
Juggling all those investments can be tricky, which is why Mack swears by tracking all her income and expenses. She maintains a spreadsheet to log her paychecks and spending, helping her keep an eye on how much more she can contribute to her 401(k) — and giving her insight into where she might need to cut back on spending.
“Each payday, I log my paycheck into my annual budget planner, and make sure that all of my transactions are up to date and look at my pay stub and track my paycheck deductions,” she said. “This is super important because I’m trying to max out my 401(k) and HSA and I don’t want to go over the limit.”
Budgeting for the month and diligently tracking her finances, Mack was able to contribute $394.44 from one paycheck to her 401(k) — a solid amount, but still less than she’d contributed in prior pay periods because the year was almost over and she was already near the contribution limit.
Set Realistic Goals and Plans
For Mack, goal setting is the cornerstone of personal finance. You don’t just accumulate wealth to dive into a pool full of money à la Scrooge McDuck. You do it to give yourself a stable future. She’s a strong advocate for zero-based budgeting, a system that requires every expense to be allocated and justified during each budgeting period. That is to say, she has to have a reason for everything she spends or invests — all of it aligned with her goals.
“I always build a plan for my income and expenses for the entire year, which lets me make realistic goals,” she said. “I love seeing my progress each month and I know in real time if I’m on track. Setting goals and tracking your progress is a cheat code to personal finance. It keeps your eye on the bigger picture and helps you give you a ‘why’ for your money.”
For Mack, one of those “whys” is a stable retirement, driving her commitment to max out her 401(k) every year.
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