Friday, August 17, 2012

Money: Baby Steps to Retirement

"Take control. If you don't use the reins, the horse will be in control of you and may carry you from where you want to go."

I just read an article in Real Simple Magazine (LOVE!) that inspired me to write another blog post about money. Now, I will be honest here and tell you a few facts about me. I am not a financial expert. I have plenty of debt. I don't always follow my own advice. I'm a mess, right? Well not really, if you consider most of America (and apparently most women). I have had a 401k since my first "real" job at 20 years old. I watch my pennies. You get the idea. I just wanted you to know that I'm not a complete financial idiot, but I'm also not a financial guru. 

So, this article I read... women are apparently afraid of dealing with money. Not in terms of going out shopping (which I kind of hate), but in terms of saving for the future (which I kind of love). It seems that saving for retirement is something that we, as women, don't focus on enough. We like to watch our daily expenses, but we don't look at the big picture. 

If there is anything that you take away from reading this, it would be that you need to buy a book for yourself. The Millionaire Next Door, by Thomas J. Stanly and William D. Danko is something that you should pick up. You can buy a used copy on Amazon (here's the link to the book, to make it even easier for you) for like $3, which could be the best $3 you'll ever spend. I read this book right after graduating college, and it completely changed my life. Seriously. I grew up poor, always wishing I could have what the rich kids had. This book helped me let that feeling go and realize that just because people may seem to have it all, things may actually be quite different behind closed doors. Rather than always having the newest and/or flashiest thing out there isn't going to help you in the long run. Get by with what you can, and put the difference in the bank. Financial security is more important that the newest tech gadget. 

If you have a 401k available through your work, you should definitely take advantage of it. Does your employer match your contribution (for example, some companies will contribute 100% of what you put into your account)? Even better! It would be silly to let that free money go to waste. The money will automatically come out of your paycheck, and you probably won't even notice the difference. If you aren't offered one through your employer, you could speak with your bank about setting up an IRA (for more info, this link helps explain the difference). You can start out small (maybe 2%) if you're scared, and increase it as you become more comfortable. Many plans will let you increase your contribution each year, to align with your annual raise. You definitely won't notice the increase that way! The money will keep growing and growing, and you'll be able to rest easier knowing that something will be there for you when you retire. If you're interested in understanding more about compounding interest (your money growing), check out this link for more information and calculations. This graph shows you how $1000 will grow over ten years, without doing anything at all (except choosing the right account to start)! 

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Nobody ever sat me down and taught me about saving money. I saw a lot of financial chaos around me, and I was following that path myself until I graduated college and really woke up. Realizing you're now an "adult" can be scary! I started doing lots of research online, there is a ton of information out there if you look for it. Eventually I was adjusting my 401k on my own (most have automatic plans that you can select based on your age and/or risk profile), and felt in control. When switching jobs last year, I had to meet with an advisor from a big financial company (who I won't name) that held our 401k accounts. I had never met with one of these advisors before, because I didn't really get the lingo (I google a lot while I research) and felt overwhelmed. I had two advisors (both men, no offense) ask me who diversified my 401k for me, and they refused to believe I did it myself until I explained how I did it. The whole "but you're a young woman" and "we've never seen this before" thing offended me more than flattered me back then, but in hindsight I have more confidence over my financial decisions. So don't be scared off by the scary retirement prospect, and don't be afraid of the lingo. Start small and don't be afraid to google the fancy words. Investing your time up front will be a huge payoff in the long run. Trust me. 

I have so much more to say on money stuff, but I will hold off for another time. I don't want to overwhelm your eyes with a novel about money right now. 

Now, go buy that book! Really! 

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