My advice to a 20 something investor…

Start doing it. Seriously dude. You aren’t getting any younger. I don’t need to bore you with the specifics of compound interest as I’ve done that many times before. Instead I need to give you a Personal Finance Pimp Slap across the face and beat some darn sense in to you. You have to start investing in your future…before your future is here.

Look, I don’t even care what you invest in, just so long as you form the habit of doing it. Maybe you think America is doomed to failure, invest in Kazakhstan. Or perhaps you want to invest in a specific companies stock…go for it (although I never would).

“But Ninja, I don’t have the ability to invest right now, I’m broke.’ Cry me a river, then go drown in it. Or better yet, go input your annual income in to this calculator and then tell me you’re broke.

Plus, who said ‘investing’ meant strictly in the stock market? Maybe you need to invest in paying down your debt more aggressively, or perhaps investing in yourself by reading a ‘self-help’ book or even exercising more.

You may subscribe to the belief “Tomorrow isn’t promised” and as a result live slightly more care free, but I’m willing to bet FOR YOU, tomorrow IS gonna come. So don’t be an idiot and  start investing.

I wont tell you how to go about doing it, but here is the most recommended practice…

  • Contribute to your 401K, whatever your employer will match, usually around 5% (if you get no match proceed to step 2).
  • If possible, max out your Roth IRA ($5,000)
  • If you still have extra cash, go back to your 401K andcontribute ( up to $16,500)
  • And if you still have extra cash, take me out to dinner.

Investing doesn’t have to be hard, but it does have to happen. If you’re a 20-something reader of PDITF, and you aren’t investing in your future, do me a favor and click this link.

How old were you when you first invested? How old were you when you seriously/consistently started investing? If you aren’t, what’s holding you back (debt, medical issues, stupidity)? How simple (or complex) do you get with your investments?

Interest is interesting

The interesting thing about interest, is that it acts as our frenemy (friend/enemy). It’s often a major player in wealth building, but also one of the driving forces behind the ‘paycheck-to-paycheck’ lifestyle. It can work for or against you. The choice is yours.

To kick things off, I thought I’d start with a chart I’m sure we’ve all seen before. It shows just how important investing while you’re young really is. It compares a 25 year old that invests for 11 years, to a 35 year old that invests for 26 years. The results are rather interesting (pun intended)….

Pretty crazy stuff, huh? The younger dude only invested for 11 years, but came out with a butt-load more money than the older dude. It just goes to show that interest can be your best friend, especially when you have time on your side, but as Newton’s 3rd Law of Motion says: “To every action there is an equal and opposite reaction”

This, my friends, means that interest can bend you over and….well we won’t go there. Unfortunately, a bunch of people (maybe you being one of them) don’t realize this. They see a $15/month credit card payment and think life is just peachy. News Flash: It’s not that simple.

The following table shows how long it takes to payoff a $10,000 credit card debt (13% interest rate), when only minimum monthly payments are made. Any guesses as to how long it will take to pay off this debt? Scroll down to find out…

This is what I call gettin’ scr-izz-ewed….
Month Minimum
Payment
Interest
Paid
Principal
Paid
Remaining
Balance
1 $200.00 $108.33 $91.67 $9908.33
2 $198.17 $107.34 $90.83 $9817.50
3 $196.35 $106.36 $89.99 $9727.51
4 $194.55 $105.38 $89.17 $9638.34
5 $192.77 $104.42 $88.35 $9549.99
6 $191.00 $103.46 $87.54 $9462.45
7 $189.25 $102.51 $86.74 $9375.71
8 $187.51 $101.57 $85.94 $9289.77
9 $185.80 $100.64 $85.16 $9204.61
10 $184.09 $99.72 $84.37 $9120.24
11 $182.40 $98.80 $83.60 $9036.64
12 $180.73 $97.90 $82.83 $8953.81
13 $179.08 $97.00 $82.08 $8871.73
14 $177.43 $96.11 $81.32 $8790.41
15 $175.81 $95.23 $80.58 $8709.83
16 $174.20 $94.36 $79.84 $8629.99
17 $172.60 $93.49 $79.11 $8550.88
18 $171.02 $92.63 $78.39 $8472.49
19 $169.45 $91.79 $77.66 $8394.83
20 $167.90 $90.94 $76.96 $8317.87
21 $166.36 $90.11 $76.25 $8241.62
22 $164.83 $89.28 $75.55 $8166.07
23 $163.32 $88.47 $74.85 $8091.22
24 $161.82 $87.65 $74.17 $8017.05
25 $160.34 $86.85 $73.49 $7943.56
26 $158.87 $86.06 $72.81 $7870.75
27 $157.42 $85.27 $72.15 $7798.60
28 $155.97 $84.48 $71.49 $7727.11
29 $154.54 $83.71 $70.83 $7656.28
30 $153.13 $82.94 $70.19 $7586.09
31 $151.72 $82.18 $69.54 $7516.55
32 $150.33 $81.43 $68.90 $7447.65
33 $148.95 $80.68 $68.27 $7379.38
34 $147.59 $79.94 $67.65 $7311.73
35 $146.23 $79.21 $67.02 $7244.71
36 $144.89 $78.48 $66.41 $7178.30
37 $143.57 $77.76 $65.81 $7112.49
38 $142.25 $77.05 $65.20 $7047.29
39 $140.95 $76.35 $64.60 $6982.69
40 $139.65 $75.65 $64.00 $6918.69
41 $138.37 $74.95 $63.42 $6855.27
42 $137.11 $74.27 $62.84 $6792.43
43 $135.85 $73.58 $62.27 $6730.16
44 $134.60 $72.91 $61.69 $6668.47
45 $133.37 $72.24 $61.13 $6607.34
46 $132.15 $71.58 $60.57 $6546.77
47 $130.94 $70.92 $60.02 $6486.75
48 $129.74 $70.27 $59.47 $6427.28
49 $128.55 $69.63 $58.92 $6368.36
50 $127.37 $68.99 $58.38 $6309.98
51 $126.20 $68.36 $57.84 $6252.14
52 $125.04 $67.73 $57.31 $6194.83
53 $123.90 $67.11 $56.79 $6138.04
54 $122.76 $66.50 $56.26 $6081.78
55 $121.64 $65.89 $55.75 $6026.03
56 $120.52 $65.28 $55.24 $5970.79
57 $119.42 $64.68 $54.74 $5916.05
58 $118.32 $64.09 $54.23 $5861.82
59 $117.24 $63.50 $53.74 $5808.08
60 $116.16 $62.92 $53.24 $5754.84
61 $115.10 $62.34 $52.76 $5702.08
62 $114.04 $61.77 $52.27 $5649.81
63 $113.00 $61.21 $51.79 $5598.02
64 $111.96 $60.65 $51.31 $5546.71
65 $110.93 $60.09 $50.84 $5495.87
66 $109.92 $59.54 $50.38 $5445.49
67 $108.91 $58.99 $49.92 $5395.57
68 $107.91 $58.45 $49.46 $5346.11
69 $106.92 $57.92 $49.00 $5297.11
70 $105.94 $57.39 $48.55 $5248.56
71 $104.97 $56.86 $48.11 $5200.45
72 $104.01 $56.34 $47.67 $5152.78
73 $103.06 $55.82 $47.24 $5105.54
74 $102.11 $55.31 $46.80 $5058.74
75 $101.17 $54.80 $46.37 $5012.37
76 $100.25 $54.30 $45.95 $4966.42
77 $99.33 $53.80 $45.53 $4920.89
78 $98.42 $53.31 $45.11 $4875.78
79 $97.52 $52.82 $44.70 $4831.08
80 $96.62 $52.34 $44.28 $4786.80
81 $95.74 $51.86 $43.88 $4742.92
82 $94.86 $51.38 $43.48 $4699.44
83 $93.99 $50.91 $43.08 $4656.36
84 $93.13 $50.44 $42.69 $4613.67
85 $92.27 $49.98 $42.29 $4571.38
86 $91.43 $49.52 $41.91 $4529.47
87 $90.59 $49.07 $41.52 $4487.95
88 $89.76 $48.62 $41.14 $4446.81
89 $88.94 $48.17 $40.77 $4406.04
90 $88.12 $47.73 $40.39 $4365.65
91 $87.31 $47.29 $40.02 $4325.63
92 $86.51 $46.86 $39.65 $4285.98
93 $85.72 $46.43 $39.29 $4246.69
94 $84.93 $46.01 $38.92 $4207.77
95 $84.16 $45.58 $38.58 $4169.19
96 $83.38 $45.17 $38.21 $4130.98
97 $82.62 $44.75 $37.87 $4093.11
98 $81.86 $44.34 $37.52 $4055.59
99 $81.11 $43.94 $37.17 $4018.42
100 $80.37 $43.53 $36.84 $3981.58
101 $79.63 $43.13 $36.50 $3945.08
102 $78.90 $42.74 $36.16 $3908.92
103 $78.18 $42.35 $35.83 $3873.09
104 $77.46 $41.96 $35.50 $3837.59
105 $76.75 $41.57 $35.18 $3802.41
106 $76.05 $41.19 $34.86 $3767.55
107 $75.35 $40.82 $34.53 $3733.02
108 $74.66 $40.44 $34.22 $3698.80
109 $73.98 $40.07 $33.91 $3664.89
110 $73.30 $39.70 $33.60 $3631.29
111 $72.63 $39.34 $33.29 $3598.00
112 $71.96 $38.98 $32.98 $3565.02
113 $71.30 $38.62 $32.68 $3532.34
114 $70.65 $38.27 $32.38 $3499.96
115 $70.00 $37.92 $32.08 $3467.88
116 $69.36 $37.57 $31.79 $3436.09
117 $68.72 $37.22 $31.50 $3404.59
118 $68.09 $36.88 $31.21 $3373.38
119 $67.47 $36.54 $30.93 $3342.45
120 $66.85 $36.21 $30.64 $3311.81
121 $66.24 $35.88 $30.36 $3281.45
122 $65.63 $35.55 $30.08 $3251.37
123 $65.03 $35.22 $29.81 $3221.56
124 $64.43 $34.90 $29.53 $3192.03
125 $63.84 $34.58 $29.26 $3162.77
126 $63.26 $34.26 $29.00 $3133.77
127 $62.68 $33.95 $28.73 $3105.04
128 $62.10 $33.64 $28.46 $3076.58
129 $61.53 $33.33 $28.20 $3048.38
130 $60.97 $33.02 $27.95 $3020.43
131 $60.41 $32.72 $27.69 $2992.74
132 $59.85 $32.42 $27.43 $2965.31
133 $59.31 $32.12 $27.19 $2938.12
134 $58.76 $31.83 $26.93 $2911.19
135 $58.22 $31.54 $26.68 $2884.51
136 $57.69 $31.25 $26.44 $2858.07
137 $57.16 $30.96 $26.20 $2831.87
138 $56.64 $30.68 $25.96 $2805.91
139 $56.12 $30.40 $25.72 $2780.19
140 $55.60 $30.12 $25.48 $2754.71
141 $55.09 $29.84 $25.25 $2729.46
142 $54.59 $29.57 $25.02 $2704.44
143 $54.09 $29.30 $24.79 $2679.65
144 $53.59 $29.03 $24.56 $2655.09
145 $53.10 $28.76 $24.34 $2630.75
146 $52.62 $28.50 $24.12 $2606.63
147 $52.13 $28.24 $23.89 $2582.74
148 $51.65 $27.98 $23.67 $2559.07
149 $51.18 $27.72 $23.46 $2535.61
150 $50.71 $27.47 $23.24 $2512.37
151 $50.25 $27.22 $23.03 $2489.34
152 $49.79 $26.97 $22.82 $2466.52
153 $49.33 $26.72 $22.61 $2443.91
154 $48.88 $26.48 $22.40 $2421.51
155 $48.43 $26.23 $22.20 $2399.31
156 $47.99 $25.99 $22.00 $2377.31
157 $47.55 $25.75 $21.80 $2355.51
158 $47.11 $25.52 $21.59 $2333.92
159 $46.68 $25.28 $21.40 $2312.52
160 $46.25 $25.05 $21.20 $2291.32
161 $45.83 $24.82 $21.01 $2270.31
162 $45.41 $24.60 $20.81 $2249.50
163 $44.99 $24.37 $20.62 $2228.88
164 $44.58 $24.15 $20.43 $2208.45
165 $44.17 $23.92 $20.25 $2188.20
166 $43.76 $23.71 $20.05 $2168.15
167 $43.36 $23.49 $19.87 $2148.28
168 $42.97 $23.27 $19.70 $2128.58
169 $42.57 $23.06 $19.51 $2109.07
170 $42.18 $22.85 $19.33 $2089.74
171 $41.79 $22.64 $19.15 $2070.59
172 $41.41 $22.43 $18.98 $2051.61
173 $41.03 $22.23 $18.80 $2032.81
174 $40.66 $22.02 $18.64 $2014.17
175 $40.28 $21.82 $18.46 $1995.71
176 $39.91 $21.62 $18.29 $1977.42
177 $39.55 $21.42 $18.13 $1959.29
178 $39.19 $21.23 $17.96 $1941.33
179 $38.83 $21.03 $17.80 $1923.53
180 $38.47 $20.84 $17.63 $1905.90
181 $38.12 $20.65 $17.47 $1888.43
182 $37.77 $20.46 $17.31 $1871.12
183 $37.42 $20.27 $17.15 $1853.97
184 $37.08 $20.08 $17.00 $1836.97
185 $36.74 $19.90 $16.84 $1820.13
186 $36.40 $19.72 $16.68 $1803.45
187 $36.07 $19.54 $16.53 $1786.92
188 $35.74 $19.36 $16.38 $1770.54
189 $35.41 $19.18 $16.23 $1754.31
190 $35.09 $19.01 $16.08 $1738.23
191 $34.76 $18.83 $15.93 $1722.30
192 $34.45 $18.66 $15.79 $1706.51
193 $34.13 $18.49 $15.64 $1690.87
194 $33.82 $18.32 $15.50 $1675.37
195 $33.51 $18.15 $15.36 $1660.01
196 $33.20 $17.98 $15.22 $1644.79
197 $32.90 $17.82 $15.08 $1629.71
198 $32.59 $17.66 $14.93 $1614.78
199 $32.30 $17.49 $14.81 $1599.97
200 $32.00 $17.33 $14.67 $1585.30
201 $31.71 $17.17 $14.54 $1570.76
202 $31.42 $17.02 $14.40 $1556.36
203 $31.13 $16.86 $14.27 $1542.09
204 $30.84 $16.71 $14.13 $1527.96
205 $30.56 $16.55 $14.01 $1513.95
206 $30.28 $16.40 $13.88 $1500.07
207 $30.00 $16.25 $13.75 $1486.32
208 $29.73 $16.10 $13.63 $1472.69
209 $29.45 $15.95 $13.50 $1459.19
210 $29.18 $15.81 $13.37 $1445.82
211 $28.92 $15.66 $13.26 $1432.56
212 $28.65 $15.52 $13.13 $1419.43
213 $28.39 $15.38 $13.01 $1406.42
214 $28.13 $15.24 $12.89 $1393.53
215 $27.87 $15.10 $12.77 $1380.76
216 $27.62 $14.96 $12.66 $1368.10
217 $27.36 $14.82 $12.54 $1355.56
218 $27.11 $14.69 $12.42 $1343.14
219 $26.86 $14.55 $12.31 $1330.83
220 $26.62 $14.42 $12.20 $1318.63
221 $26.37 $14.29 $12.08 $1306.55
222 $26.13 $14.15 $11.98 $1294.57
223 $25.89 $14.02 $11.87 $1282.70
224 $25.65 $13.90 $11.75 $1270.95
225 $25.42 $13.77 $11.65 $1259.30
226 $25.19 $13.64 $11.55 $1247.75
227 $24.96 $13.52 $11.44 $1236.31
228 $24.73 $13.39 $11.34 $1224.97
229 $24.50 $13.27 $11.23 $1213.74
230 $24.27 $13.15 $11.12 $1202.62
231 $24.05 $13.03 $11.02 $1191.60
232 $23.83 $12.91 $10.92 $1180.68
233 $23.61 $12.79 $10.82 $1169.86
234 $23.40 $12.67 $10.73 $1159.13
235 $23.18 $12.56 $10.62 $1148.51
236 $22.97 $12.44 $10.53 $1137.98
237 $22.76 $12.33 $10.43 $1127.55
238 $22.55 $12.22 $10.33 $1117.22
239 $22.34 $12.10 $10.24 $1106.98
240 $22.14 $11.99 $10.15 $1096.83
241 $21.94 $11.88 $10.06 $1086.77
242 $21.74 $11.77 $9.97 $1076.80
243 $21.54 $11.67 $9.87 $1066.93
244 $21.34 $11.56 $9.78 $1057.15
245 $21.14 $11.45 $9.69 $1047.46
246 $20.95 $11.35 $9.60 $1037.86
247 $20.76 $11.24 $9.52 $1028.34
248 $20.57 $11.14 $9.43 $1018.91
249 $20.38 $11.04 $9.34 $1009.57
250 $20.19 $10.94 $9.25 $1000.32
251 $20.01 $10.84 $9.17 $991.15
252 $19.82 $10.74 $9.08 $982.07
253 $19.64 $10.64 $9.00 $973.07
254 $19.46 $10.54 $8.92 $964.15
255 $19.28 $10.44 $8.84 $955.31
256 $19.11 $10.35 $8.76 $946.55
257 $18.93 $10.25 $8.68 $937.87
258 $18.76 $10.16 $8.60 $929.27
259 $18.59 $10.07 $8.52 $920.75
260 $18.42 $9.97 $8.45 $912.30
261 $18.25 $9.88 $8.37 $903.93
262 $18.08 $9.79 $8.29 $895.64
263 $17.91 $9.70 $8.21 $887.43
264 $17.75 $9.61 $8.14 $879.29
265 $17.59 $9.53 $8.06 $871.23
266 $17.42 $9.44 $7.98 $863.25
267 $17.26 $9.35 $7.91 $855.34
268 $17.11 $9.27 $7.84 $847.50
269 $16.95 $9.18 $7.77 $839.73
270 $16.79 $9.10 $7.69 $832.04
271 $16.64 $9.01 $7.63 $824.41
272 $16.49 $8.93 $7.56 $816.85
273 $16.34 $8.85 $7.49 $809.36
274 $16.19 $8.77 $7.42 $801.94
275 $16.04 $8.69 $7.35 $794.59
276 $15.89 $8.61 $7.28 $787.31
277 $15.75 $8.53 $7.22 $780.09
278 $15.60 $8.45 $7.15 $772.94
279 $15.46 $8.37 $7.09 $765.85
280 $15.32 $8.30 $7.02 $758.83
281 $15.18 $8.22 $6.96 $751.87
282 $15.04 $8.15 $6.89 $744.98
283 $15.00 $8.07 $6.83 $738.05
284 $15.00 $8.00 $6.76 $731.05
285 $15.00 $7.92 $6.70 $723.97
286 $15.00 $7.84 $6.64 $716.81
287 $15.00 $7.77 $6.57 $709.58
288 $15.00 $7.69 $6.50 $702.27
289 $15.00 $7.61 $6.44 $694.88
290 $15.00 $7.53 $6.37 $687.41
291 $15.00 $7.45 $6.30 $679.86
292 $15.00 $7.37 $6.23 $672.23
293 $15.00 $7.28 $6.16 $664.51
294 $15.00 $7.20 $6.09 $656.71
295 $15.00 $7.11 $6.02 $648.82
296 $15.00 $7.03 $5.95 $640.85
297 $15.00 $6.94 $5.88 $632.79
298 $15.00 $6.86 $5.80 $624.65
299 $15.00 $6.77 $5.72 $616.42
300 $15.00 $6.68 $5.65 $608.10
301 $15.00 $6.59 $5.57 $599.69
302 $15.00 $6.50 $5.49 $591.19
303 $15.00 $6.40 $5.42 $582.59
304 $15.00 $6.31 $5.34 $573.90
305 $15.00 $6.22 $5.26 $565.12
306 $15.00 $6.12 $5.18 $556.24
307 $15.00 $6.03 $5.09 $547.27
308 $15.00 $5.93 $5.02 $538.20
309 $15.00 $5.83 $4.93 $529.03
310 $15.00 $5.73 $4.85 $519.76
311 $15.00 $5.63 $4.77 $510.39
312 $15.00 $5.53 $4.68 $500.92
313 $15.00 $5.43 $4.59 $491.35
314 $15.00 $5.32 $4.51 $481.67
315 $15.00 $5.22 $4.41 $471.89
316 $15.00 $5.11 $4.33 $462.00
317 $15.00 $5.00 $4.24 $452.00
318 $15.00 $4.90 $4.14 $441.90
319 $15.00 $4.79 $4.05 $431.69
320 $15.00 $4.68 $3.95 $421.37
321 $15.00 $4.56 $3.87 $410.93
322 $15.00 $4.45 $3.77 $400.38
323 $15.00 $4.34 $3.67 $389.72
324 $15.00 $4.22 $3.57 $378.94
325 $15.00 $4.11 $3.47 $368.05
326 $15.00 $3.99 $3.37 $357.04
327 $15.00 $3.87 $3.27 $345.91
328 $15.00 $3.75 $3.17 $334.66
329 $15.00 $3.63 $3.06 $323.29
330 $15.00 $3.50 $2.97 $311.79
331 $15.00 $3.38 $2.86 $300.17
332 $15.00 $3.25 $2.75 $288.42
333 $15.00 $3.12 $2.65 $276.54
334 $15.00 $3.00 $2.53 $264.54
335 $15.00 $2.87 $2.42 $252.41
336 $15.00 $2.73 $2.32 $240.14
337 $15.00 $2.60 $2.20 $227.74
338 $15.00 $2.47 $2.08 $215.21
339 $15.00 $2.33 $1.97 $202.54
340 $15.00 $2.19 $1.86 $189.73
341 $15.00 $2.06 $1.73 $176.79
342 $15.00 $1.92 $1.62 $163.71
343 $15.00 $1.77 $1.50 $150.48
344 $15.00 $1.63 $1.38 $137.11
345 $15.00 $1.49 $1.25 $123.60
346 $15.00 $1.34 $1.13 $109.94
347 $15.00 $1.19 $1.01 $96.13
348 $15.00 $1.04 $0.88 $82.17
349 $15.00 $0.89 $0.75 $68.06
350 $15.00 $0.74 $0.62 $53.80
351 $15.00 $0.58 $0.50 $39.38
352 $15.00 $0.43 $0.36 $24.81
353 $15.00 $0.27 $0.23 $10.08
354 $10.19 $0.11 $0.09 $0.00

That’s right. It takes 354 months to payoff this debt. That’s 29.5 years. Not only does it take you almost three decades to finally rid yourself of the credit card ball and chain, but the $10,000 you borrowed winds up costing you $21,267. I don’t know about you, but I can think of a lot of things I’d rather do with $11,267 I paid in interest charges.

Take that same $10,000 CC debt and, instead of making the minimum payment, let’s say you make a fixed $300/month payment every month. Wanna know how long it takes to payoff the CC? 42 months, or 3.5 years. That’s 26 years sooner than the other option. Not to mention it saves you nearly $9,000 in interest payments.

Making the minimum payments on your high interest debt (when you have the ability to pay more) is just about the stupidest thing you could do…. ever.

Did you at any point fall victim to “minimum payments” with your high interest debt? Did you delay saving for retirement because you thought “There’s always tomorrow”? What do you find interesting about interest?

Want results, take risks

Am I the only person that doesn’t understand why some people choose to live a life of fear? Few good things come without risk. I think the world would be a better place if anyone learned to step out of their comfort zone and take some risks every now and again.

Here are a few instances from my life, in which I took a risk, and reaped the benefits…

Career.

Did you know I graduated with a degree in Psychology, but a concentration in pre-medicine? That’s right. I wanted to be a doctor. Specifically, a psychiatrist. I did really well in my pre-med courses and, come graduation time, was prepared to take the MCAT. But then, a funny thing happened. I got an email from one of my Psychology professors for a job as a Special Agent. My professor thought that I would be a great candidate for the position and recommended I apply. So apply I did (not thinking I’d actually get the job). That summer I worked as a Psychiatric Technician so I could gain relevant experience to what I thought would be a long and prosperous career in medicine. Fast forward three months. It was the morning of my MCAT and I was playing “Eye of the Tiger” to pump myself up for the big test. Suddenly my phone rings. I answer it, and low and behold I received a job offer for the Special Agent position I applied for. I accepted the job offer that morning. I took a huge risk in accepting a job I knew little about, but 2.5 years later I am confident I made the right decision. Although it was always my dream to be called Dr. Ninja, I think Special Agent Ninja has a pretty nice ring to it… don’t you?

Girl

Girl Ninja and myself quite possibly have the most unique/weird/frustrating/awkward/awesome love story ever. I’ll save the story for another time, but I can tell you this; Taking a leap of faith and giving my heart to Girl Ninja was the best decision I’ve ever made. There were a few occasions in which we almost didn’t make it, but through a lot of hard work, and an evolving love for one another, I am absolutely confident every frustrating moment was worth it. There is no one else in the world I would rather be frustrated at than Girl Ninja (aren’t I so sweet :)).

Money

You had to know this one was coming right? What kind of PF blogger would I be if I didn’t tie in money somehow? By investing standards, I guess I am considered a risky investor. 100% of my retirement accounts sit in the stock market. And, as we all are aware, the market can be nightmarish rollercoaster in which it seems the only direction is down. Although I hate seeing my account balances drop 50% in a relatively short time span, I am more than happy to weather the storm. I am confident the risks I take in the market will pay off ten fold come time to retire. In fact, I would argue that I take on very little risk. The real risk takers are the people that put no money in to retirement out of fear or stupidity. They squander away their cash now, but will be in for a rude awakening when they go to retire and have little or no funds available to them. We all know the social security situation is not looking good. Is it really smart to rely on a suffering program? I’ll bet on the stock market over social security any day.

Yes, life is about taking risks, but that doesn’t give you an excuse to go be a stupid-head. If you want to start a basket weaving business and leverage a $100K in debt to start said business, you aren’t taking a risk… you’re just being dumb. Life is about taking a leap of faith, but only if you have done your research and are confident that leap is likely to have a positive outcome.

What areas in your life have you taken on some risk? Have you ever held back from “taking the leap” and now regret it? Would you consider yourself a ‘risky’ or ‘risk adverse’ individual? Have you ever taken a big risk and had it bite you in the butt?

p.s. I’m currently on business in Miami for the next 2.5 weeks. If anyone is familiar with the area and has any restaurants or recommendations on things to do, PLEASE LET ME KNOW.

Procrastinators unite….tomorrow

One of my favorite things about authoring this blog is getting to read the various emails people send me from time to time. Yesterday, I received a simple, one question email…

I am fairly new to being financially savy and PF blogs. I just wanted to get your opinion. At what age/income should you open a IRA?

My response….

Never. Haven’t you watched the news in the last two years!? Quit your job, sell your assets, and move to Antarctica. America is doomed. Oh wait, what? The market is actually up 47.2% since this time last year? Fudge! I knew I should have invested in a Roth IRA instead of The Foxhole…

In all serious, the time to invest was yesterday. Don’t procrastinate, it’s time to get the retirement ball rolling. That is, assuming: you have income, you don’t have crazy amounts of high interest debt, you’re okay taking on some risk, and you don’t want to work until you are 120.

I really can’t tell you when you should begin investing, you have to make that decision for yourself, but I can share with you some pretty popular investment strategies for people under 40.

Step 1: Adjust your lifestyle so your expenses fall below your income. You have to be spending less than you make each month!

Step 2: Pay down any and all high interest debt (credit card, bank loans, etc) before you begin investing.

Step 3: If your employer matches a percentage of 401k investing, make sure you get that match. It’s free money and you have to be CRAZY to pass up free money. (If you don’t get a match proceed to step 4.)

Step 4: Look in to opening a Roth IRA. You can contribute up to $5,000 in it this year and it is a great investment vehicle for the younger crowd.

Step 5: If you were able to max out your Roth, then you should look in to going back and upping your contributions in your 401k from, say 5% to 10% (or whatever the heck you want).

That is the general order I come across in most books/PF blogs, but how you manage your money is really your call. If you want to live it up while you are young, contributing to retirement may not be the best idea. If you don’t want to be on welfare when you are in your 60’s then you may want to buckle down and begin growing your nest egg.

I personally began contributing to my 401K and Roth IRA as soon as I graduated college and got my first job, making $38k/yr. The earlier you start, the richer you will be.

I think her question is interesting and I’m curious, when all of you peeps started contributing to retirement. How old were you? What was your income? If you haven’t started yet, why not (debt, fear, stupidity)? Is there anything you would change in my “guidelines to follow” for retirement.

My 401K is gonna be pissed!

Screen shot 2009-12-10 at Dec 10, 2009, 11.38.09 PMI made a pretty impulsive move yesterday. I decided to reduce my 401K contributions from 8% of my gross salary to 5%. *Gasp* Yes, that does mean I am going to have less in my retirement accounts, but don’t worry, I have a ninja-riffic plan in the works. If you read my post on Monday, you know I’m flirting with the idea of living outside of my spreadsheet. As a result, my net worth come retirement may be a little lower, but I think my overall quality of life will improve.

There were a few things that lead to my decision to decrease my contributions.

1) I was contributing 8% to my 401K and fully funding my Roth IRA each year. At my current income ($50K) that works out to 18% of my gross income being invested in retirement accounts. If you keep up with PF blogs, news stories, and TV shows, you’ll notice almost all ‘experts’ recommend a 20-something individual save between 10%-15% of his gross income for retirement. I was contributing 3% more than the average recommendation. Obviously, the more you contribute, the richer you will likely be. But I don’t really care if I have $3MM or $4MM in my account come retirement, as long as I have enough to live a comfortable lifestyle I’ll be a happy ninja. Oh, and the government only matches 5% anyways.

2) I essentially just gave myself a 3% raise. I have contributed 8% to my 401K since my first day of work (at the ripe age of 22). I’ve totally learned to manage my money being 8% poorer than I could be. I now will be taking home about $1,200 more per year (after taxes). That’s $1,200 I can use to save for a house, take a vacation, buy a moped, or rent out an entire movie theater for a private viewing of Twilight III. Sure, most of those expenses are not necessary, but don’t forget, I’ll still be socking away 15% for my gray hair days ahead.

3) The third, and probably most important, reason I decided to reduce my retirement contribution by 3% is this: I had no plans for the short term. Sure saving 18% for retirement is great, but guess what? That doesn’t make me rich until I’m 60 years old. What if I want to have a good chunk of change accessible in my 40’s? What if I want to retire early, but don’t want to be penalized for withdrawing from my retirement accounts? Well my friends, this is where the ‘short-term’ investing game comes in to play. I have to start exploring other means to grow my money. I have been so focused on retirement, I completely forgot to establish a game plan for my 30’s, 40’s, and 50’s.

Sure, I am taking away 3% from my retirement accounts each year, but that doesn’t mean I’m going to waste it. Instead I will transfer that money in to an investment vehicle of my choosing (stocks, bonds, etc). I need to start growing money for a 5, 10, and 20 year time horizon so I can do things like pay cash for the next vehicle I purchase, move up in house as my family size grows, pay for my kids college, and basically enjoy pre-retirement life.

As long as I contribute 15% of my gross income towards retirement, I have no need need (or reason) to contribute more. I’ve realized for me, anything above that 15% mark can be better served in short term mutual funds, real estate, cash, and bonds.

If you aren’t sure what percentage of your income you should be setting towards retirement, ask yourself this question. Would you rather have access to $6MM at age 60, or access to $1MM at age 45 and $3MM by age 60. I use to think I wanted $10MM all at retirement, but I now think I’d be just fine with $3MM in retirement if it meant I had $1MM available to me much sooner.

I have a couple questions for you all, how much do you contribute to retirement (if any), how much would you ideally like to contribute to retirement (if you are currently meeting that goal), and would you rather have $6MM at age 60, or $1MM at 45 and $3MM at age 60? What strategies have you established for pre-retirement goals? What short term investment vehicles do you recommend? Do you think I’m crazy? Any helpful hints, tips, and criticism is greatly appreciated 🙂

I refuse to let my house be an investment

So I’m a little weird and have a slight obsession with HGTV. I’m not particularly fond of the decorating shows, but when it comes to shows on the home buying process I’m pretty much an addict. I was watching “My house is worth what?” last night when I had an epiphany: I don’t want my house to be an investment.

This show focuses on individuals that are having their homes appraised. One of the couples in yesterday’s episode said they wanted their house appraised because they had not saved for retirement properly and they were hoping the equity would provide some funding for their later years. Those people are freakin’ crazy!

I know a lot of people are eager to purchase homes because they consider them a “good investment”. I wont argue with them, but I don’t ever plan to classify my residence as an investment. Instead, my home will be a forced savings account.

Once I get to experience the joys of home ownership, I never intend to return to renting. What does this mean? I don’t consider home ownership an investment because I am always going to need a place to live. Although it’s true that I will probably build equity in my home over the years, I am reminded there is a difference between paper gains and realized gains. I feel like I’m probably confusing the crap out of you so let me see if this example helps.

Let’s pretend I buy a house this year for $200K. Assuming a 5% home appreciation over 10 years my house will be worth $325K in 2019. Pretty sick that I made $125K without having to do anything. But let’s not forget our enemy inflation. Taking 3% inflation in to account it is more like a $57K gain over the ten years, still pretty sweet. But guess what. Ten years from now I’m still going to need a place to live. The $57K is just a paper gain, meaning it is intangible money (unless I took out a HELOC, which I will NEVER do!). The only way to actually have access to that $57K would be to sell my house. If I sold my house where am I going to live…in another house?

I guess in theory one could argue that you could downgrade in home as you get older to pocket the appreciation, but why the heck would I want to downgrade in life? As I get older I plan to UPGRADE. I know that home ownership can be a pretty sweet gig in the long term and it probably is an “investment”, but I am much more comfortable thinking of my home as a forced savings account so that I can eventually buy a bigger and better house. It made me really sad to see this couple on HGTV put all of their retirement hopes in the equity in their home. They are crazy and I don’t like it.

Sometimes the best investments return no money

Can ya guess where this article is going? It’s time to get all sentimental up in hurr and take a step away from money… kind of. If you’re like me, it’s probably not uncommon for you to make everything become a monumental financial decision. I have been trying to balance my priorities and make sure my journey to being freaking rich doesn’t prevent me from having fun and making “investments” in other areas of my life.

As much as we value money, I’m sure we all value friends, family, fun, happiness, beer?, sleep, laughter more. As a means of accountability (to myself) I am going to lay out the various parts of my life that I want to continually be investing in.

The girlfriend (aka The Girf): Let’s face it, dating is expensive. I don’t reap the benefits of combined housing, joint checking accounts, dual income like I will when there is a ring around my finger. As the boyfriend, I personally believe I should pay for virtually all meals. That’s not because I feel obligated too, but because I want to. But as we all know, dining out can get expensive real quick. I have actually caught myself avoiding dates with my girlfriend to spare a couple bucks…dumb. There is nothing wrong with paying a little extra for an “investment” in our relationship. The date isn’t just about the food we shove in our face, but about the quality time we get together, trying something new, and getting away from distractions. I’d way rather pay $20 for a meal with my Girf than $20 to go a movie theatre and not get to talk to her. I will temper my uber frugal nature with a little bit of love and common sense.

Family/Friends: I live in San Deezy. The majority of my family and friends live in Seattle. A round trip ticket usually costs around $250. It’s been a while since I have gone home just to go home. That’s not to say that I haven’t been lately (was there in January, March and April), but each trip had a specific purpose. January was Xmas time and March and April were both for weddings. It’s been a while since I have just taken a vacation for the sole purpose of enjoying the company of my parents, siblings, and friends. I think about heading up there every summer for a week long get away, but haven’t done it since college. Even if I can’t make it back to the Pacific Northwest I can sure try and call/email/tweet/facebook/instant message/text my friends and family more often.

Food: Eating healthy is easier said than done for me. I just can’t get over how expensive it is to eat organic, non preserved, no sugar, etc. I have cruised to the grocery store and made it a mission to buy healthier choices. Needless to say, the bill is noticeably higher. I use to be frustrated with a larger grocery bill, but then I thought to myself “Is more expensive ALWAYS a bad thing?” I enjoy life and want to extend my time on earth as long as possible. Eating twinkies, Jack in the Box, and ice cream wont help accomplish that goal. Over the last year I have drastically changed my eating habits and I try to cook (from scratch) the majority of my meals. Although, I still don’t buy strictly “organic” I have definitely improved the sexiness of my grocery cart.

Fitness: I think we all know that running, yoga, weights, sit-ups, and just about any other type of physical activity is good for us, but few actually do anything about it. Don’t pull the “I hate running” or the “I have a bad back and can’t lift weights” excuse. Everyone can do something to improve their physical fitness. You know, and I know, that we should dedicate at least 30 minutes of our day to some type of activity (no going to the fridge to grab a popsicle doesn’t count as an activity). When’s the last time you broke a sweat? I hope it wasn’t when you were trying to squeeze in to a pair of jeans you use to wear 6 months ago. It takes discipline to get healthy, just as it takes discipline to get out of debt.

These are just a few of the areas of my life that I want to make a conscientious daily investment in. These returns will far exceed those of my 401k and Roth IRA. Where are you investing your time? What are some important things that you have let get away from you? What are you gonna do to better your quality of life?