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Over the last couple years my thoughts on retirement have changed a bit. A few years ago, my goal was to retire early and live the easy life. As I have grown in my walk with God, I have found that retirement doesn’t seem to be mentioned in the Bible. That doesn’t mean we should be chopping logs 10 hours a day when we are 85, but that God has us down here for a purpose and a specific amount of time.
The truth is that God’s plan for us will keep us busy until we die. I don’t think that necessarily means employment until our last breath, but for some it very well could. If His plan is being fulfilled in our lives via our occupation, who are we to say when we are finished?
To save or not to save for retirement
Even though my mind has changed about retirement, I have not stopped saving in my retirement accounts. Regardless of whether or not I am employed full time when I am 70, why not be prepared financially? To me it seems like a much better idea to have cash in the bank, so that I can be free to do whatever God has for me to do.
The worst case scenario is that I have a big chunk of cash that has been earning interest for decades that I can give away to bless someone. To me, saving for retirement seems like a no-brainer.
Bible verses about retirement and resting
While the Bible doesn’t seem to have specific verses referring to retirement, it does point out the importance of rest. God, our creator, understands the value of rest and relaxation. That, of course, is why He created Sundays! To add to that…
Then, because so many people were coming and going that they did not even have a chance to eat, he said to them, “Come with me by yourselves to a quiet place and get some rest. Mark 6:31
As far as my previous plans for retirement - the below passage from Luke pretty well summed up my plans. Needless to say, I am glad God showed me the error of my ways…
And he told them this parable: “The ground of a certain rich man produced a good crop. He thought to himself, ‘What shall I do? I have no place to store my crops.’
“Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store all my grain and my goods. And I’ll say to myself, “You have plenty of good things laid up for many years. Take life easy; eat, drink and be merry.” ‘
“But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?’
“This is how it will be with anyone who stores up things for himself but is not rich toward God.” Luke 12:16-21
The thing I have come to realize is that God created us to be in motion. You can use our muscles as an example. If they are not getting pushed, they become weaker. They grow only when they are stretched beyond comfort. Our brains function the same way. They need to be pushed in order to grow and when all pressure is eliminated they begin to atrophy.
This is why work is so beneficial for us. While it is difficult, it makes rest that much more pleasurable.
The sleep of a laborer is sweet, whether he eats little or much, but the abundance of a rich man permits him no sleep. Eccl 5:12
It all comes back to stewardship
The bottom line with the whole retirement savings question is that as stewards we have a responsibility to do the best with what we have been given. Saving with retirement accounts like 401ks or IRAs is a great way to multiply the talents that we have been given. But, it is not the only way. Every person is going to have to give an account of their stewardship to God, so whatever that means for you individually is what you need to do.
Technorati Tags: Bible verses, Retirement
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Is your 401k losing money?
After reading a few articles about people talking about their diminishing 401(k)s, I decided to check and see just how well mine has been holding up against the crisis. I haven’t checked it in months, because I am in it for the long haul and I know that over the last 100 years we have had about 25 recessions and 25 recoveries. I know, some of the talking heads are saying that this time it is different, but from the few I have lived through, they seem to say that every time. John brought up a good point that we should be taking advice from Warren Buffett (who has been buying lately since things are so cheap) because he obviously has been successful, rather than people being guided by fear.
What to do when your 401k loses a lot of money
Anyway, back to my 401k. It is down. A lot. 37% this year to be exact, and just like you I have the strong temptation to pull it out and hold on to what is left of it, BUT I am not going to. Historically, when things have gotten really bad, a couple months or years later they come back in full force.
No one really knows for sure what is going to happen, but I think that even statistically speaking, the chances are good that we as an economy are going to come out of this recession/depression just like the others.
What if I want to retire soon?
Hopefully, if you have had your retirement funds invested wisely, you shouldn’t have too much invested in stocks as you near retirement. I know bonds haven’t been doing very well either, but they haven’t been draining 401ks the way stocks have lately.
If I were planning on retiring in a couple of years and had lost as much money as I have in my 401k, I would probably plan on working a bit longer, or figure out a way to live off a little bit less. I would just hate to pull my money out on the downturn of the market.
As my wife and I have been working on getting out of debt, we have learned a lot about living off of less. If I knew I had to retire in two years and would be stuck with a lot less in my 401k that I hoped, I would…
- Focus my time and energy on paying off debt. Credit cards, car loans, any other loans, and then the mortgage. Knocking out each one of these debts just reduces the amount you need to survive. This of course is why being debt-free is so fun - you can pay your bills each month with a minimum wage salary.
- Pray about whether or not to move your funds to cash. I truly believe that the market is going to come back, but I have no idea how far (if any) it will have recovered in a couple years.
- Consider a second job to pay off debt to minimize your expenses. There are tons of freelance jobs you can do from home.
What I am doing with my 37% loss in my 401k
I am trusting the advice and methods of a few wise investors by sticking it out. I am fighting the urge to bail out. I don’t know for sure what will happen, but I am using my best judgement and doing that.
But the bottom line is regardless of what happens to our money in the bank, our 401k, or the economy we still have the promise that God is going to take care of us…
Matthew 6:25-27
“For this reason I say to you, do not be worried about your life, as to what you will eat or what you will drink; nor for your body, as to what you will put on. Is not life more than food, and the body more than clothing? “Look at the birds of the air, that they do not sow, nor reap nor gather into barns, and yet your heavenly Father feeds them. Are you not worth much more than they? “And who of you by being worried can add a single hour to his life?
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This is a reprint of an article I recently wrote for BeingFrugal.net
Interview with a millionaire
I believe that success in life is rarely a case of luck, but rather a matter of cause and effect. If you do A and B you will get C. In most cases if you just do what others have done to get a desired effect you will get the same.
So, if you want to learn how to build a chair, you should go ask a chair-maker how he does it. If you want to learn how to become a millionaire, you should ask a millionaire how they did it.
It was learning this lesson that led me to seek out an interview with Bill. He was a friend of a friend who I had never met before, but was very excited at the opportunity to share some of his wisdom so he agreed to my request to meet with him.
Going into our meeting I was expecting that he would be explaining investing techniques that were miles over my head that would take me years or decades to master. In truth, the meeting turned out to be more of a lesson through profound simplicity in the manner that Warren Buffett has become known for.
The interview with Bill
Bill had been a high-school teacher for most of his career and had not invested a single penny until he was 35. His story was encouraging to me because he had built his portfolio on a teacher’s salary, which I was assuming I would be making at least that much and I had a 10 year head start on him since I was 25.
He spent the first part of our meeting explaining to me the vital importance of telling your money where to go, rather than seeing where it went. He explained that a great majority of Americans’ retirement accounts were miniscule because of two factors: eating out and poor car purchases.
His method to his car purchases was simple and very similar to Dave Ramsey’s plan. He only bought used Japanese cars that were at least 2 years old. He then would drive them for a decade or so before getting a new one. Hearing his suggestion, I began to feel a bit sheepish since I had just pulled up in my car that just happened to be a few years newer than his.
But I was still learning about sacrifices and Bill was doing everything he could to convince me of the impact even small sacrifices could make. He talked about how his decisions involving his cars and how choosing to cook most meals at home had freed up many thousands of dollars each year. Those extra savings would then, of course, get invested.
He explained that in the grand scheme of things eating at home and driving a used car were two small sacrifices that made his success possible. The challenge was that most people are unwilling to delay their gratification.
He explained further that, “they want it now and are unwilling to wait for it. This is why most people won’t be able to build a million dollar portfolio. Until they overcome the obstacle of self, they will be stuck where they are.”
Bill’s investing strategy
Bill had grown his portfolio with mutual funds. He spent his energy seeking out the best performing and most consistent mutual funds. He read a lot of mutual fund guides and suggested that I get the Kiplinger’s Annual Mutual Fund Guide each year.
He explained that everything you need to find good investments is available for free at the library. He would often go to the library and read all the investment newsletters, use the rating services, and skim the investing magazines for ideas.
He took a Buffett style approach with each one. His intention was to pick great ones and hold them for decades unless they gave him a very strong reason to do otherwise. But, just like Buffett, he bought with the intention of never having to sell.
He had over the years invested in a few stocks (mostly blue-chips), but he made it very clear to me that most of the impact had been made by his mutual funds. He did not dissuade me from investing in stocks, but he suggested that it be a small percentage of my portfolio until I learned more.
Another similarity he had to Dave Ramsey was that he was strongly opposed to debt. As soon as he had a large enough portfolio built up, he and his wife sold a chunk of their investments to pay off their house. Once their house was paid off, they then had that much more money each month to add to their investments.
Final Thoughts
I left the meeting with Bill very encouraged. I had read a few books on investing and was at least familiar with everything he mentioned. But my encouragement came from the fact that I had now met and talked to someone who actually did what the books say to do - and it had worked. It suddenly translated from a theory that I knew should work to substantial evidence that I was on the right track to reach my goals.
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This post recently appeared on FreeMoneyFinance.com
I am a big fan of Warren Buffett and have always been inspired by his words of wisdom. These are my five favorites…
“Do business with people you like and who share your objectives.”
Isn’t there more to life than money? I have met people who I wouldn’t work with for a million dollars, haven’t you? People are people and you will never be completely insulated from people who bug you, but if you are hiring them or choosing to work with them, they might as well be people you enjoy being around.
When your business partners are sharing your objectives you won’t have to waste your time pulling against each other. If you are building a business to selling eco-friendly products with the sole intention of saving the rainforest and your partner is only concerned with increasing profits - you are going to be in trouble.
“Leave your children enough money so they can do anything, but not enough that they don’t have to do anything.”
A cousin of mine received 8 million dollars as an inheritance on his 21st birthday. A few people I was talking to couldn’t believe me when I said I wouldn’t want it. To me, the joy in life is overcoming the challenges and reaching the successes. I would have felt like I was robbed of the chance to fight and earn it.
I want to be able to look back on my life and see all the obstacles that I overcame in order to reach my destination. Don’t get me wrong, everyone needs help on the way. For some people the 8 million dollars might be just the help they need to get their non-profit off the ground or get their business started.
But for me, if I would have had 8 million handed to me at age 21, it wouldn’t have helped, it would have been crippling. I would have been tempted to relax just a bit too much. I would have probably ended up a big, fat blob. 
The irony is that as much as some people desire retirement and the “easy life” many of them find themselves bored out of their minds. We all need something to live for. I remember how miserable I became when I was out of work for a few months. I wanted to contribute to society, but couldn’t find the opportunity. I felt like a big, fat blob and wanted more than anything just to have an opportunity to do some work. Amazingly, as soon as I started working again, I felt a whole lot better about myself.
“Decision making abilities fade as cash flow increases.”
Suppose you only have $5 in your pocket until the end of the week, it is likely that you will make a good decision with it, because it is all you have. On the other hand, if you have $100 for the week, your decisions regarding a $5 purchase are far less critical since you have another $95. Therefore, people tend not to treat those decisions with the same respect they would if it was their last $5.
Parkinson’s Law states that expenses rise to meet income. It is the reason that many people wonder why their last raise didn’t make paying the bills any easier. The way to defeat Parkinson’s Law is to treat each dollar as if it is the last - to make the best possible decision for each and every dollar. Not as a miser, but as someone who is choosing to make wise decisions with their money.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Think Eliot Spitzer, Michael Vick and Kobe Bryant. One day they can be very respected in their fields and the next they can have a whole different perception in the eyes of the public.
With the advances in technology it is becoming more and more difficult to hide from mistakes. Society is much more transparent than it used to be. You can Google a phone number and get directions to the location, employers are checking up on Facebook and Myspace pages, and you can see what was on a website years ago. The days of being able to do something stupid and trying to cover it up are gone. So, Warren’s advice is more relevant now than ever.
“There are no called strikes in the ball game of investing.”
Yea, it would have been nice to have bought Google @ $75 during the IPO, or better yet Microsoft. But, you didn’t LOSE any money by not investing. Even if someone else made thousands while you sat on the sidelines, you still did not LOSE any money. There are plenty of stocks that you could have bought that you would have lost money.
While I agree with what Warren is saying, I have noticed that the problem for most people is that they are afraid to swing the bat. They stand up there watching opportunity after opportunity go by only later to say, “I wish I would have…” I did it for years.
I would see a company pop up and say to myself, “that would be a great stock to buy,” only to watch the price continue to rise without swinging the bat. I would feed myself excuses mostly about how I didn’t have enough money and how it was risky - both were kind of true. But you can now get started investing for as little as $100 at Sharebuilder and we all know that without risk there is no reward. So just get in there, wait for a good pitch and swing for the fences.
this post was included in the carnival of personal finance
Do you have any other great words of wisdom from Warren?
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After spending a good chunk of change on my wife’s engagement ring a few years ago, I was a little bit annoyed to read this article about new diamond technology. Evidently, the diamond farming technology has improved to the point where experts can no longer tell the difference between a real and a lab grown.
Growing diamonds like crops
The natural process for creating a diamond requires a lot of pressure, heat and time. Scientists have been trying to duplicate and speed up this process and unitl recently they have been small and impure. But, over the past decade they have had pretty good success.
Researchers have perfected a process called chemical vapor deposition (CVD) which grows pure and comparable sized diamonds in a matter of months. They are so good in fact that the writer of the article went to a jeweler with one of the stones to get an unbiased assessment of the diamond’s quality:
…The next day, I place the .38 carat, princess-cut stone in front of Virgil Ghita in Ghita’s narrow jewelry store in downtown Boston. With a pair of tweezers, he brings the diamond up to his right eye and studies it with a jeweler’s loupe, slowly turning the gem in the mote-filled afternoon sun. “Nice stone, excellent color. I don’t see any imperfections,” he says. “Where did you get it?”
“It was grown in a lab about 20 miles from here,” (he) replied.
He lowers the loupe and looks at me for a moment. Then he studies the stone again, pursing his brow. He sighs. “There’s no way to tell that it’s lab-created.”
So this begs the question: If diamonds will soon be able to be mass-produced on demand, won’t real diamonds be worth a lot less?
Unless they can figure out a fail-proof method of telling them apart, I think it is inevitable. The challenge is that unlike a Gucci handbag and a knockoff, both diamonds are made from the same materials: carbon. One is just created a lot faster than the other.
What good could come out of grown diamonds?
- The positive to this is that those involved in the exploitation of people in this movie may see their profits dry up. I haven’t seen Blood Diamond and I really don’t know much about the whole situation, but hopefully this would help bring it to an end.
- You may be able to get a fat rock for your honey for a fraction of the price. If it is just the sparkle of the gem that you are interested in, it will still be there.
- There are endless technological advancements that can come from the cheapening of diamonds. Some experts think they could, “become as significant as steel or silicon in electronics and computing.”
I will not be pawning my wife’s ring anytime soon, but it may be something to keep in mind before spending your hard-earned cash on a new diamond.
This article was featured in the Carnival of personal finance.
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Should I save for retirement or pay off student loans?
This is a question that I have been asked a lot. Yesterday a reader (Megan) left a comment…
“Hi Bob. I have a question for you. I am a recent grad who had a job and a retirement account during the two years of post-college to starting grad school. Now I’m just starting grad school with student loans and I wanted to find out if it’s best to stop adding to it until I graduate.”
I kind of touched on this in a post I wrote about financial advice for newlyweds.
In the post I was talking about our decision to continue funding our retirement accounts while paying down our debt. I said…
“…I have come to understand the impact that time has over investments. Without getting into too much detail, I will just say that getting started investing early puts you at a high advantage. It is not just a little bit better than waiting, but a HUGE amount better. Having enough for retirement can be a breeze if you get started while in your 20’s. It was for this reason that I wanted to get the ball rolling with my investment portfolio.”
401k’s, Roth IRA’s, and student loans
My student loans were locked in at about 3%, but I don’t think rates that good are available today. I assume a 10% return on my retirement savings, so even if you are paying 5% on your student loans and earning 10% (or even 6%) you still come out ahead. Mathematically, this seems to be the much stronger answer. However, Dave Ramsey’s method -based on our behaviors rather than math - would eliminate any and all debts before investing for retirement.
Personally, if it were me, and I could get 5% or better on my student loans I would be funding an Index Fund within my retirement accounts (401k and Roth IRA). But, at the same time I really hate debt and try to avoid it at all costs.
Do you have any suggestions for Megan? What would/did you do?
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I found this article about Roth IRA’s and I think it is worth posting. It goes over the basics of Roth IRA’s and why you should consider one, if you don’t already have one. If you are thinking, “what’s an IRA?” then you should probably start here.
Right now, you may be wondering why you should invest in a Roth IRA if you currently have a retirement plan (401k, 403b, etc.) with your employer. The Roth IRA has many benefits that other retirement plans don’t have, and chief among them is the fact that your investment earnings may accumulate tax-free. In other words, your Roth IRA has the opportunity to grow without incurring any taxes and can be distributed to you tax free, if some certain conditions are met.
While there are advantages to owning a Roth IRA, there are also some rules you should think about before you decide this is the account for you. First, not everyone can take advantage of a Roth IRA. You or your spouse must have earned income or compensation – this includes wages, tips or salary. However, be aware that earned income or compensation does not include rental, interest, dividend, pension annuity or deferred compensation income. Second, your modified adjusted gross income cannot exceed certain limits. For single people, your modified adjusted gross income must be less than $114,000 and $166,000 for married couples filing jointly.
Contributions you make to the account are not tax deductible, but may be withdrawn any time without tax or penalty. Before taking withdrawals from your Roth IRA you need to determine if you are receiving a “qualified distribution.” Any withdrawal that is not a “qualified distribution” can result in income taxes and IRS penalties. For example, any earnings on your principal will be subject to income taxes should you decide to withdraw them prior to the five-year holding period or before age 59 ½ (contact your state department for state tax rules). In addition, these earnings are also generally subject to a 10% IRS penalty.
Tax and penalty free withdrawal of your Roth IRA earnings for “qualified distributions” can be made once a five-year holding period is satisfied and one of the following applies: you have reached the age of 59 ½, you have become disabled, the funds are used for a first-time home purchase (subject to a $10,000 lifetime limit) or the funds are distributed to a beneficiary after your death.
After thinking over the rules, if you are eligible for a Roth IRA you may be wondering how much you can contribute. For 2008, you may make regular contributions that do not exceed $5,000. If you are 50 or older, you can also make “catch-up” contributions of up to $1,000 per year for a total contribution of $6,000.
A couple of other important items worth noting – contributions to your employer’s retirement plan do not exclude you from making contributions to a Roth IRA, and owning a traditional IRA does not prevent you from setting up a Roth IRA either (although contributing to a traditional IRA for the same year will limit the amount you can contribute to your Roth IRA).
Whether or not you decide a Roth IRA is the right retirement account for you, it’s always smart to plan ahead and save money for the future. Never underestimate the importance of saving for the future and using a variety of investment vehicles to achieve your goals.
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I think mutual fund investing is a good way to get started investing. I own two mutual funds currently and there are a few good ones out there, but most mutual fund managers still don’t beat the average market returns. It is for this reason that I recommend Index funds. Actually anyone who looks at the numbers and isn’t trying to sell you something will tell you the same thing.
Index funds give you the market returns
To put it simply, investing in Index funds is like buying a tiny share of each company in the market. So, for example, if you bought an Index fund that tracks the S&P 500 (which is a good choice) you would own a tiny amount of each company listed in the S&P 500.
The S&P 500 index includes 500 large companies that do a good job of representing the US economy as a whole. So, by investing in the S&P 500 index, you are essentially betting that US stocks will go up.
History can never be a tool for perfectly predicting the future, but it is about the best tool we have to work with. Historically over the last 100 years US stocks have gone up about an average of 11% a year. Some years have been down 25% and some up 40%, but averaged together they come out to about 11% a year.
What is the difference between a mutual fund and an index fund?
With mutual funds you pay a manager to pick a bunch of stocks that you (the shareholder) will be invested in. If there were more great managers out there this would be a great idea, but since the great majority of them fail to beat the market returns, index funds are a good choice.
So, by owning all of the stocks in the market rather than just the ones that most money managers suggest - you win. I know it seems crazy that most money managers with all of their education and experience still can’t beat the market, but it is the sad truth and the secret that they don’t want you to know.
The mutual fund industry secret
Mutual fund companies don’t want you to know that an Index fund will outperform most of their funds. They spend millions of dollars in advertising and number crunching to show you a chart that shows how their fund returned 13% on cloudy Tuesdays of every month except January over the last 2.4 years. I am exaggerating. A little bit, but not much.
Many work very hard and advertise a lot to convince people to buy their products, even though they are not as good as having an index fund.
Oh, and guess who pays for that advertising and the money manager’s yacht who failed to beat the market returns. Yep, you the shareholder. Which is yet another reason why index funds are so great. They don’t need a money manager since the stock-picking has already been pre-determined. Because of this, index funds generally charge much lower fees than managed mutual funds.
Can it really be that most money managers fail to beat the market?
Have you ever been stuck in traffic and realized that the lane next to you was moving faster than yours? You quickly dart into that lane, only to come to a stop while the cars in your old lane start moving faster. Then you go back to the original lane only to have the same thing happen again.
Just like staying in your original lane during a traffic jam often yields the best results, so too with investing. Many investors do the “grass is greener over there” approach. They are always chasing last year’s biggest returns. Well, many money managers in the mutual fund industry follow the same pattern. To add to it, they have to pay fees each times they “switch lanes.” Every time they buy or sell out of a security, they have to pay commissions. This ultimately comes out of the shareholder’s pocket.
Should you never buy mutual funds?
Don’t get me wrong there are some good mutual funds out there that frequently beat the market, but they are few and far between.
Oh, and be warned, most brokers you talk to about index funds will tell you why mutual funds are so much better. Examine the points of their argument very carefully. Keep in mind that most brokers make a lot more money off of mutual funds than index funds (if they even offer them) and I will let you decide.
Technorati Tags: index funds, mutual funds
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The Advantages of Mutual Fund Investing
The goal of this post is to go over the basics of mutual fund investing. To start, a mutual fund is a company whose main objective is to professionally invest a pool of money in securities and earn a positive return for shareholders. By doing this, these companies allow you to share the rewards and risks of investing.
So when you buy shares in a mutual fund you are essentially buying stock or bond holdings in various companies, based on the underlying investments. Your shares are pooled together with the other investors’ shares, which allows for a high level of diversification.
Mutual fund investing has a few advantages:
- The funds are managed by full-time money managers. They research market and economic trends, and then use this information to make decisions about buying, holding or even selling securities to enhance returns.
- Diversification is one of the first things that anyone learns about investing. “Don’t put all of your eggs in the same basket, just in case you drop it you won’t lose them all.” The folks at Enron learned this the hard way as many of them who were fully invested in the company stock lost all their 401k savings when the company folded. Mutual funds help minimize this risk by spreading your money over a number of investments. By doing this the impact of one poor performer on your entire portfolio is greatly reduced.
- Many mutual fund companies offer convenient features, like automatic reinvestment, systematic payments and no-cost exchanges of funds. If you choose to, you can automatically reinvest any dividends and capital gains (profits) to purchase more mutual fund shares .
- Many mutual funds can be purchased with a low minimum investment. After an initial payment of $250, most mutual funds require as little as $25 or $50 at a time for additional investments.
- Liquidity is another nice benefit of mutual funds. Most funds offer you the ability to sell any or all of your fund shares on any business day the markets are open.
I think mutual funds are a great way for beginners to get started investing, (but even better would be index funds) Generally the risks are lower than investing in stocks, but of course the reward is more limited as well.
Anyone have any suggestions for beginners purchasing a mutual fund?
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Answering a reader question
I received a message the other day from a fellow newlywed-er (am I still a newlywed at year 3?) She was asking for a little financial advice. So, I will share what I have and hopefully we can get some input from some of the readers.
Here is an excerpt from what she wrote:
As a newlywed, I just started to plan my life with a person.
I really like your advice about using the Roth IRA to save early.
I am wondering could you write more about those?
I really want to know what you would recommend a new married couple should save up for? A house, a baby, pay off loans,Roth IRA…or what else?
Well, I guess I will just share what my wife and I are currently doing. Since we are transitioning out of the newlywed phase (having been married almost 3 years) we are likely in a similar place.
My financial story
My wife and I (look to the right) both brought a decent chunk of debt into the marriage from our past mistakes and education expenses. Since we got married we have been focusing most of our energy on paying off all of our debt. I really like the debt snowball method for getting out of debt and for the most part we have been using it. The variation that we have made is that we have been funding a Roth IRA as well as our 401k’s.
By not putting all of our financial energy into paying off our debt, we realize that it will take a little bit longer. All of our debt is at 3% interest rate or less, so paying it off quickly is not a major issue for us.
Having learned from a few wise mentors in my life, I have come to understand the impact that time has over investments. Without getting into too much detail, I will just say that getting started investing early puts you at a high advantage. It is not just a little bit better than waiting, but a HUGE amount better. Having enough for retirement can be a breeze if you get started while in your 20’s. It was for this reason that I wanted to get the ball rolling with my investment portfolio.
I say all that to say: everyone’s financial decisions of what to save up for should be based on their personal situation.
For us, our current priorities (always subject to change) are:
- Getting out of debt
- Having plenty of cash for retirement
- Home ownership
- Kids and all the expenses they bring
Because of this we have been focusing about 75% of our financial energy to paying off debt and 25% to retirement. My goal is to finish paying off our student loans this year, which will allow us to start saving for the other priorities.
Personally, I hate debt. I can’t stand the feeling of being a “slave” to lenders as Proverbs puts it. I also don’t want to have to work when I am 75. My strong feelings with both of these issues guide my financial decisions.
So, do you have any financial advice for your fellow newlyweds? What do you think young married couples should be saving for?
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