Roth IRA

There is never a better time to start investing in your future than right now. Retirement may seem like ages away, but just like your childhood, the time will fly by and suddenly you will be wanting to leave the workforce and chill for the rest of your days. So what do you do to ensure a successful future? Plan ahead. Make saving as much fun as spending and your future self will be thanking your current self every day you did.

Once you recognize the benefits of saving and investing for retirement, you may be asking where to start. Well, if you have a job, chances are the institution you work for provides a retirement plan in the form of a 401k or a 403b. Many companies, businesses and public service entities do not have automatic enrollment in these plans so it is vital that you enroll asap. Why you ask. Simple, nearly all jobs match or partly match any pretax money you contribute to these plans. That is free money people! Sign yourself up for these plans and contribute the maximum funds you can and soon enough you will be living the life of luxury in your golden years. 

Another incredibly potent source for retirement income is the IRA. My favorite type of IRA is the Roth IRA. Why do I love this baby so much? Well, any money in this account has already been taxed, so once you hit retirement what you see in the account is what you receive from the account. Awsome! Remember kiddos, do not take out money from these accounts before retirement age or you will not receive the full amount you are able to accrue. If you take out money before 59.5 you will not only pay a penalty fee but you will also be taxed on these funds. Please please please also avoid taking out a 401k loan. I know it will hurt for a little while, but it is way better to avoid touching your 401k because retirement funds are protected from bankruptcy. Just sit and wait and all will be well. 

FICO Scores

What is a FICO score? If you have a credit card, you have a FICO (Fair Isaac Corporation) score. It is a 3-digit number that determines your interest rates on credit cards, car premiums and home mortgages, it can even affect whether an employer will hire you and if a landlord ill rent to you. The higher the FICO score, the lower the interest rates and vice versa. They run from 300 to 850. Anything below 500 is dangerous. 760 to 850 is awsome.

Debt to credit limit is a big component of the score. This ratio is more important than the actual amount of debt owed. So, for example, if you have a $1000 credit limit and you charge $1000 to the card, you owe the maximum amount so you have a 1:1 or 100% debt to credit limit ratio. This lowers the FICO score. However, paying off the debt on time will positively affect FICO scores. If  you want to close the credit cards, do not do so when you owe 100% of the limit. It is also important to keep the card active so you can use them to your advantage. Charge $5 here and there, for example, pay off the debt and you will have such a low debt to credit ratio and your FICO score will soar. American Express charge cards, however, that require payments in full, do not contribute to the FICO score because they don't have monthly payments toward a credit limit. Any credit cards with credit limits should be paid off within 120 days of the due date to avoid going under water. Just a tip. Remember if you are worried about something, you simply have to do something about it. There is no sense in worrying, just take action. Make decisions powered with knowledge.

Which do I do first?

Essentially, I want to live below my means because I want to have a security blanket sufficient enough for emergencies and year long support. I don't know where this desire comes from. I have always enjoyed saving more than spending. I didn't even want my parents to spend money on gifts for me or treat me to birthday parties and extravagant affairs so that we always had enough in savings. In fact, if I buy something that is on my want list and not my need list I get a bit anxious inside. Is that weird? 

I want to enjoy the work I do to earn money. I want my future children to take on my energy of appreciation and excitement for the work I do. I want to feel pride and dignity and joy each day. That is what everyone deserves. We should not feel shame for what we do not have. We should have honesty, integrity, and pride in ourselves and our behavior. So where do we start?

For me, I have to start where I am right now. I have quite a bit of student loan debt, a few months of job searching and a personal finance course under my hat. The more I learn about finance, the more I realize how vital it is to know and to survive in this day and age. Why in the world is finance not required coursework in school?! It makes no sense to me. People get taken advantage of all the time because of a lack of basic financial knowledge. What I see now, having made a few mistakes, and undoubtedly will make a few more, when I find myself traveling in the wrong direction, I can always make a u-turn. Where I am now is a reflection of past decisions. I have control over what I think, say and do. I see that it is important to do what is right not necessarily what is easy. Having financial knowledge is the key. No one is going to care about my money more than I do. Time is on my side. Now is time to invest and save in order to amass an abundance of wealth for retirement. Yes, the sooner we invest in retirement the better off we will all be. 

So what should I do- pay off my student debt or start saving with the new job I have now? Why does it have to be either-or? Isn't it funny how we always think in terms of this or that? Why can't we do both? We can portion our income into parts. So I can make minimum payments on my student debt, cut back on my expenses, rent a smaller apartment, put some of my money into the company retirement account, hopefully the company will match part or all of the money I contribute, put part of my money into an emergency savings account and make a habit to take care of my money like I take care of my health so I will be ok and eventually when I can take care of myself, I can take care of others. This is the dream. 

Even if I had an incredible FICO score, it doesn't matter if I cannot live securely and rest assured I will be able to function and survive through the years. Yes credit- wisely using money- is really important. Getting a credit card from a credit union, such as one from creditcardconnection.org can be beneficial on both sides. The key is information, not just going about life blindly. Take back your power, make your own decisions armed with knowledge. Not all credit unions are good, but there are institutions that have capped interest rates and can be a good place to have a credit card. 

There are so many issues far beyond what I may talk about in a single post, but the main idea I simply want to convey is seek knowledge and make your own decisions. Student debt is the most dangerous debt. It is the only kind of debt that cannot be discharged by bankruptcy. It is vital to pay back student loans as soon as possible. It is also vital to save for retirement and build up financial cushions early and be able to support yourself and all of the people who are and will be dependent upon you.