I told you this picture would be back! As you know, I focus on writing about happiness on this blog. In general, I try to focus on three big ideas: financial security/frugality, health, and personal relationships. As you can probably guess from the title, this post is about the first of these. You might recall that I recently wrote an article about how I think it is a good idea to max out a Roth IRA before you turn 30. I also wrote an article back in August where I said that I wanted to max out my IRA by tax day this year (just fyi, the maximum annual contribution is $5500 right now). Well I put the final $500 into my IRA this month, officially maxing it out for the 2013 tax year.
I’m pretty pumped up about this. When I was about 22-23 I told myself that I would have an IRA started by 25. That didn’t happen. I ended up opening one late in 2012 when I was 27. I didn’t put that much into it that year, but I made it a serious goal to contribute the full $5500 in 2013. Here’s the breakdown of how much I contributed each month:
This is you giving money to your future self.
Financial security ranks in my top three for long-term happiness (the other two are personal relationships and health). Simply put, it’s hard to enjoy life if you are constantly worrying about how to make ends meet.
To that end, this post is about an easy way that you can give your future self a small financial security blanket (see what I did there… SECURITY blanket… like stocks and bonds… I know I’m terrible).
There are a million posts on a million blogs about why you should be saving for retirement. And just FYI, they’re all right. You SHOULD be saving for retirement unless you’re already retired (or have a ton of bad debt).
In this post I’ll point out the hypothetical future gains of maxing out a Roth IRA just once before you turn 30. Since the max annual contribution in 2013 is $5500 if you’re under 50, that’s the number I’ll be using today.
I decided to go with a Roth in this example because it makes the gains simpler to wrap your head around. You don’t have to figure out how much it will be post-tax because it’s already post-tax.
Dolla’ dolla’ billz, y’all
I recently came into $4000. As someone who is relatively young (and relatively broke), I thought you might be interested to know what I did with the money. Did I buy some new gadgets? Hit the casino? New clothes? Pay off debts? Sock it away? Before we get to the answer, I should probably first explain where the money came from.
A few weeks ago I was helping a friend move. He had all his stuff in a storage unit, so several of us just met him over there to help him load the stuff into a 17 foot uhaul. We got done loading the truck and pulled around to the entrance so he could turn in the keys to his unit.
First things first: keeping small inconveniences in their place. The key to this is knowing what you want. I mean, specifically, what are your big picture goals? If you don’t know, then you should stop reading this and give the question some serious thought. OK, I’m now going to assume you know what your big picture goals are. Maybe you want a family, a house, or financial security. We can even go a little smaller scale. Maybe you want to lose 10 pounds, or be able to squat 315 pounds, or learn Spanish. The key to making sure little things don’t matter is knowing what the big things are.