Some awesome things about Personal Finance

I woke up to a text from one my good friends yesterday morning that read “Can I pull 100% of my Roth contributions at any time without penalty?”  Why yes, yes you can. Roth contributions can be pulled at any time, for any reason, without any repercussions. That’s why I like to think of my Roth IRA as a second-tier emergency fund. My Roth is really just as liquid as my savings account and that’s why I think all young people should seriously consider opening one up. The Roth is  like the filet mignon of retirement planning for 20-somethings.

But today’s post isn’t actually about Roth IRA’s or filet mignon, but instead just a list about some of the most important things I’ve learned through my personal finance journey. In no specific order, here they are:

    • You don’t have to be rich to end up rich. Never knew a $50,000/year salary could turn in to millions in retirement if done right.
    • Albert Einstein once said the most powerful force in the universe is compound interest. I had no idea age played such a significant role in one’s financial future. The earlier you get your shizz together, the better off you will be down the road.
    • 401k’s sound really boring, but in reality they are pretty straightforward and typically provide a guaranteed return on investment (for example my employer automatically matches up to 5% of my gross salary in contributions). Can’t beat a 100% guaranteed return on investment anywhere.
    • Renting IS NOT a terrible financial decision.
    • Minimum payments on debt are the worst. I remember calculating how much my $28,000 student loan would end up costing me if I made minimum payments. The answer….$52,000. Minimum payments suck. BAD!
    • Credit Cards are pretty awesome when used responsibly. Girl Ninja and I get airline miles for every dollar we charge to the card, dollars we would have spent anyway for things like groceries and gas. Not to mention, that my C.C. also gives me a 30 day, interest free loan. Awesome sauce!
    • Investing really isn’t that complicated. In about 30 minutes you can set up and get started investing in a Roth IRA. Investing seems intimidating, but it really doesn’t have to be. Don’t let fear be an excuse not to act.
    • You don’t have to have a car payment. When Girl Ninja and I bought our car a handful of people made inferences that we must now be proud owners of a car payment. Not so much the case. A little saving goes a long way and contrary to popular belief, you don’t need to finance your next car either.

Alright I’ll end this geekgasm here. Don’t want to totally nerd out on you all, but man Personal Finance really can be exciting. The bullet points above were all things that really resonated with me as I’ve navigated the world of PF for the last few years. What bullet points would be on your list? What are some of your favorite things you’ve learned, or come across in your journey?

18 thoughts on “Some awesome things about Personal Finance

  1. Got to agree with you on the Credit Card point – Also a 15 month 0% APR period is great too – we took full advantage of this for new furniture when moving house. This way we can pay it back in small chunks (aiming to pay it back in 10 months for safety) while enjoying the furniture etc. through the summer with family and friends 🙂

  2. You have a lot of great points there. I wish I had known many of them when I was much younger! I’m sure there were some resources out there in the early 90’s, but I didn’t even know enough to be looking for things on how to handle money. I’m hoping that blogs like this are reaching today’s youth so that they won’t make tons of early mistakes. Unfortunately, it seems like too many people are making the mistakes first, then looking for ways to get out of the situation instead of looking for ways to avoid debt.

    • Totally agree with you, Alice! I really wish the wealth of information that is now available on-line was around back in my day… it might have prevented me from making some financial mistakes… though I have learned from them.

      #1 on my bullet point would be “Don’t buy more house than you can afford”; not that Hubby and I have, but we know of others that have bought houses that were the max of their pre-approval mortgage amounts, and now they are so stretched financially that one little glitch could spell financial disaster.

      #2 – Saving for the future is COOL!!

  3. You say a you can get started with a Roth IRA in about 30 minutes and its beneficial to start in your 20’s <– thats me! It does seem intimidating so do you have any tips on where to start

    • Pick a broker and just fill out the forms. I prefer discount brokers like Schwab, Fidelity, etc. Most of them will have a minimum balance that is waived if you deposit a certain amount per month (usually $100). If you don’t want to pick investments you can choose a target date retirement fund that will auto-rebalance based on your age.

      I know it sounds a little scary, but it really isn’t and once you automate the transfers (be it weekly, bi-weekly, monthly, etc) you’ll never miss that money you could end up with a nice pile of cash when you retire!

      • True, but you are not obligated to pick a fund that correlates with your age. If Vgd’s 2050 allocation is more aggressive than you prefer, you can select the 2030 fund, which starts a glide path towards more conservative investments earlier.

        Because of their far lower fees, I prefer Vgd’s target funds to Fidelity’s “freedom” funds.

  4. It might suck to save up cash for a couple years in a low-interest account, but it’s pretty sweet when you finally make the purchase you’ve been saving for– and negotiate a 10% discount for paying cash.

  5. “Investing really isn’t that complicated. In about 30 minutes you can set up and get started investing in a Roth IRA. Investing seems intimidating, but it really doesn’t have to be. Don’t let fear be an excuse not to act.”

    To the above, I’d expand:
    (a) Be aggressive in your investing while you are young; then get more conservative with age.
    (b) Keep your fees low. Passively managed index funds beat active funds much of the time.
    (c) Diversify. Allocate your investments among US stocks, international stocks, treasuries and corporate bonds, real estate, and cash.
    (d) Buy low, sell high. The worst thing to do when the market falls is to panic and sell. The best thing is to buy. The second-best is to do nothing.

  6. Simply taking charge of your personal finances. It seems basic but many people just don’t do it. As long as they can pay their bills they’re perfectly content not knowing where their money is going. Since my husband and I developed a budget we are able to get things paid off faster, get money in savings, and still enjoy life.

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  8. Thanks for this great post, Ninja! I agree on so many of your points – this is pretty solid advice! The point about renting IS NOT a terrible financial decision really hits home with me. I’m in a situation where there is no way that I’ll be settling down any time soon. Really, if I bought a house, I wouldn’t be there long enough to gain any equity before I’d have to move again. And who wants to have to lug a lawnmower around the world anyhow? Landscaping, maintenance, and often utilities are included with rent. Weigh that against a mortgage, mortgage insurance, buying and maintaining your own lawn equipment, paying for all your own repairs…and your lifestyle/career mandates. Yeah, renting can definitely be a good financial option! More people should consider this. Especially in today’s housing market!

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