Getting started with retirement investing

I find that the biggest barrier for saving for retirement is that most people do not know where to start. People tend to get confused by paperwork, minimum investment, tax laws, what to invest in, etc. The main thing to do is to take the first step and get started. What to invest in can come later but simply putting the money aside each month or each pay period is the crucial first step.

The best option is to start with an employer sponsored plan. This can be a 401(k), SIMPLE IRA, or some other similar plan. Most of the time you fill out paperwork and the savings is deducted directly from your pay. This makes it easy for you as the money never hits your checking account. You can start by putting the money in a money market fund while you learn more about the other investment choices and can make an educated decision on what to invest in.

If your employer does not have or you are not eligible for the plan you need to venture out on your own. A Roth IRA is the best choice as all the money grows tax free. A lot of brokerages and mutual fund companies have a set minimum, usually $500 or $1000 to get started. A lot offer $0 minimum if you commit to a set monthly amount to automatically transfer in. I always suggest Vanguard as they offer low fees on accounts and have a good selection of funds to fit most peoples' needs.

If you are venturing on your own and need to meet a certain minimum start by transferring a set amount each month or each paycheck to a savings account. When you hit the minimum target open the account and make the transfers go there instead. Automating your savings will make sure you get it done and that it happens without temptation to spend the money elsewhere. While you are saving up for the minimum do your research and be sure what you want to invest your money in that fits your tolerance for risk and goals.

The time is now to stop with the excuses and save for retirement. The sooner the better. Time is in your favor when saving for retirement if you start early enough. Social Security should not be considered at all when calculating how much you need to retire. The system is mathematically upside down now and will only get worse. Benefits will shrink and starting age will get older and older. If you do end up with a some social security money then you have extra. Pretend like what money you have will be all you will ever have and you will be covered!

Remodel Finished: Now the work begins!

I am declaring that my home remodel is complete. The appraisal has been done. I am processing my new loan, and I have stopped spending 90% of every weekend working on my house. I am able to relax a bit and enjoy a little free time. Now the real work begins!

Since I have a finished house I can start to focus on a lot of other things on the list. My decoration is essentially nonexistent, I have a ton of basic household items on my "need" list, and I still need to fully unpack and organize things.

Here is a shortened version of what I need to do next:

• Move my unpacked boxes into the rooms in which they belong (or storage area)
• Unpack and sort the items in each box appropriately
• Get rid of stuff I no longer need
  
• Shop at thrift stores, garage sales, and flea markets for needed furnishings
• Make my house a home!

I definitely have my work cut out for me. It also requires a good bit of money which I don't have at the moment. My plan is to get things little by little until I have all that I need. The most important part is to not get further into debt due to impatience!

My 6 Personal Financial Wins

Yesterday I wrote about my financial blunders. Today I want to share the positive choices that I have made. We all-to-often hear about the bad choices we make and not the good. I believe that acquiring good financial habits also requires us to focus on what we do right. Here is my list:

1. Started a Roth IRA: When I was working in college I did put some money in a Roth IRA. In retrospect it would have probably been better to pay down debts but is still a good choice.
2. Built an Emergency Fund: I now have an emergency fund that equals roughly 3-months take home pay. Based on my current situation this is the best thing I could have done.
3. Contribute to my 401(k): I get matched 100% for the first 3% of my pay that I contribute. With immediate 100% vesting this was an easy choice. The match I get outweighs the interest I pay on debt and adds up fast. Worst case scenario I can withdraw it if I absolutely have too. I also save on taxes!
   
4. Bought a foreclosed home: I got such a good deal on my house that I had to buy it. I now have a roommate who covers my mortgage and I own it. I gain equity each month. I also lowered my expenses at the same time. If I had to sell it today for well under its value I would still be ahead in most cases.
5. Changed Banks: I used to pay way too much in banking fees. I got smart and moved to a bank (ING Direct) that does not charge month service charges and minimum balance fees. I also earn a lot more interest on checking and savings!
6. Tracking expenses: I now track every penny (because I have too) in order to live within my means. With the help of Quicken Online and doing 98% of my transactions via credit/debit card I have this seamless. I can log in and quickly tell where I stand currently.

As we move forward in our financial lives on the road to financial independence we have to take a step back and take a look at what we do right in order to stay motivated. Keeping track of how you are improving gives us motivation to carry on!

How to start saving for the future

I read an interesting post over at Get Rich Slowly and it inspired me to write this article. It lightly touched on the idea of how you can start saving so I decided to explore the topic in more detail. This is a step anyone can take no matter how high your expenses are or how much debt you have. This is also how I got started!

Start of by saving 1% of your income. This can be via an employer 401(k) program or a savings account done via direct deposit. You could also set up automatic transfer at your bank so each time you get paid 1% of your income gets moved. This is only 1 cent on every dollar you earn so chances are you won't even notice it.

Over time you will see your balance increase. If you are like me then you will be motivated to try to save more. This can be done a variety of ways. You can put gifts, rebate checks, side work pay, and others into your savings. Pretend like you never had the money. You can then increase from 1% of your pay to 2% or 5%. Your savings will begin to snowball.

As you pay down your debts and have all of this "extra money" each month make the move to taking the same monthly payment amount in spread it among your savings. 401(k)s, Roth IRA, emergency savings, and other goals. You will soon turn from being the person "who could never save a dime" to "wow look at all the money I have put away!" No one saves a ton of money at once. It is built over time. Along with savings comes freedom. Freedom is priceless!