Tag Archives: retirement

Do These 5 Things with Your Money Now!

Would you buy this?

We are a spend culture where we tend to buy things we don’t need to satisfy our “wants” but we rarely think if they meet our “needs”. Obviously the money and our available disposable income is finite. Once you spend it, there is no buyer’s remorse. Some things you can return but often than not they come with a cost.

Today I’m not going to talk about what we can spend because that defeats the purpose of my blog, which is to plan for retirement. My goal as a financially responsible person is to be able to save enough so I can retire comfortably. That is easier to say than actually doing it. The best advise I can give is to start small and hopefully you will get a snowball effect whereby the money you save will continue to grow exponentially.

You are reading this probably you are very interested in investing your money or how to plan for retirement. Trust me it is never too early when it comes to these two subjects. I wished someone told me earlier or I could have been a millionaire (on paper) today.

Retirement Plan Contribution

Without a doubt, investing in retirement plan such as 401K plan or IRAs is the most important thing that any of us should do. The retirement plan will be your only source of income when you retire. If you still believe that Social Security benefits will be available by the time we retire, you will be in for a big surprise. The last time I read that Social Security Administration will be bankrupt by 2030 – that means all the contribution that we gave to SSA from our paychecks will disappear.

The retirement plans are what I consider out-of-sight/out-of-mind. Contributing to these funds is so seamless that you would hardly notice that it was taken out of your paycheck. The real benefit is the retirement plans are tied to stock market and historically it has been going up since the stock market was tracked. Naturally the amount you invested in the retirement plans will only go up. To give you a perspective, the average price Dow Jones index increased by a whopping 13,484% since 1930.

Investing in Stock Market

With the interest so low I’m not going to recommend saving your money in a high yield savings account. In the last several years, my combined savings in PMMA and CD of nearly $70 thousand only earned less than $200 annually. The money I invested in stock markets for the last 3 years in Robinhood has grown in value by almost 45%.

Investing in stock market has its risk but if history tells us anything, the risk can be mitigated if we understand it well. Additionally, my portfolio is telling me that the benefits outweigh the risk. So don’t wait. The earlier you invest the likelihood the value will increase is high. Before jumping head first, do read some of my posts earlier on how to mitigate the risks and what new investor should do.

Save in College Savings Plan

This is extremely helpful for anyone who have children. The college savings plan, also known as 529 account allows investor to invest in certain fixed funds and allow it to grow in value. When you need to pay for higher education, you can withdraw it without penalty tax free, as long as it is used to pay for education purpose.

The great thing about the 529 account is you can set it as recurring investment every month, again another out-of-sight/out-of-mind investment vehicle. My son started going to Rutgers University and I can tell you what a life saving the 529 account is. I believe the fund for my son account grown at least by 40% since I started investing 10 years ago.

Pay Off Credit Card Debt

Paying off debt is always the first advise any financial planner will tell you and it is no brainer. Debt, particularly credit cards, has interest rates that are usually high. This kind of debt eat in your disposable income by making the loan more expensive. For illustration purpose, the expensive handbag you purchase may have cost $4,000. By not paying the credit card in full, the cost of the handbag could become $6,000 depending on when you pay the debt off.

The biggest downside of not paying off credit card debt is the lost of income. Instead of paying off the interest on the credit cards, you could have used the money and invest in Apple stocks. Imagine the amount of money you could have made by investing in Apple stock 20 years ago. I did a quick calculation and its stock went up by about 3,900%.

Shop Smartly

This goes to back to my opening remarks, the “want” and the “need”. We all need a car for transportation purpose. However, do we need a car for convenient purpose or for self-image purpose? For example, a small SUV cost about $30,000 in today’s market while a Tesla Model X costs up to $90,000. The difference in $60,000 could be invested in stock market and let it group. There are just too many consumers who all into the “image” trap and never thought of their own personal finance. Most did not consider the additional cost of insurance and maintenance when it comes to expensive cars like the Tesla.

Understandably that purchasing something we don’t need gives us a sudden satisfaction. However, the feeling will go away very quickly and we are stuck with a huge debt that will need to be repaid.

Learn to Avoid the Biggest Mistake of My Life – Start Investing (Part 1)

There are certain things in life that you know you should have done but didn’t. When you realized that you made the mistake (or in this case not correcting it) it was too late because the time had passed and the ship had sailed.

Before you jumped into any conclusion, I’m not referring to something that I did and I regretted my decision. In this case I am referring to something that I didn’t do and now I regret it. I’m alluding to investing early for retirement and I’m hoping that anyone who reads this post and heed my advice and start investing.

I realized I made this mistake about 5 years ago when I noticed that I hardly earn any interest from all the money I saved in my savings. In fact, I have a large sum saved in the Preferred Money Market Account, which is supposed to pay higher interest than the regular savings. If I recall of the $50 K that I have in the account I earned less than $150 in interest. That got me thinking if I made the fatal mistake by putting everything in savings.

After I started working full-time I always put the money that I don’t use in savings. This is something that we learned at a very early age that we save all our money in bank using savings account. For the next 20 years working I continue to put all my money in the same account and it felt good seeing the balance keep adding up.

And was I wrong… I realized soon enough that I have been giving my money to the bank for use (that’s what bank does – it takes the money that lend it out or reinvest it) and I was not getting my fair share. Granted that this is not the only bank’s fault but also the economy itself. Banks will only pay the interest rate based on what the Federal Reserve Bank dictate. In turn the banks will use the government’s rate and unilaterally pay a much lower interest rate to the customers. I’m not an expert in this field so I won’t attempt to explain any further.

For the last several years I’ve been doing some reading and researching during my free time (like almost never). I read several articles on how many young people in their mid-30s become millionaires. In each articles they mention only one thing, “investing”.

For the purpose of this post, investing refers to buying stocks or bonds in the financial markets. I’m not referring to investing for retirement such as 401K or IRA because it is a very different subject. Investing comes with certain risks because the market can be volatile. You could invest $10 thousand today and you could lost all of them tomorrow.

I am currently reading a book titled “Quit Like a Millionaire” by Kristy Shen and Bryce Leung. The book talks about how to become a millionaire by investing smartly and find loopholes in the system. They are able to make their first million and quit their job. Using the income they earn from their investment they are able to travel the world 365 days a year.

Obviously I do not see myself quitting my job and just focus on investment. There is an inherent risk in this idea. Additionally, I have a family that I need to take care so quitting my job is out of the question. My short-term goal is to be able to earn passive income by investing in stock market. Ultimately I want to be able to retire comfortably without worrying if I am every able to pay my electricity bill.

As a declaration, I am not a financial planner nor a stockbroker. I am not in the position to give any investment advise. It is better to leave this to the professionals. In this post and subsequent post, I want to highlight several things I learned that I believe will be beneficial to anyone who wants a better financial outcome other than what Social Security can provide us.

Invest Early

Investing in stock market 5 or 10 years ago was reserved for the rich only. Anyone who wanted to invest in the stock market would need to have a large sum of money saved and would willing to pay a high commission to stockbrokers. The incentives to invest our hard earned money were not there.

Today is very different. New ideas and technology are popping up everywhere. That give rise to business model that allow regular people to invest in stock mark for free. The app that I use is Robinhood. Buy and sell stocks are easy and commission free. Hence, there is no reason not to invest. Obviously, before buying any stocks please do your homework and ensure you are not investing in risky stock.

Each stock have metrics and numbers to assist buyers in make the necessary determination. For someone who is new in stocks, I would highly recommend that you invest in reputable companies such as Microsoft, Apple or Disney. Keep in mind that while some companies are reputable, they may not do well in the market. For example, Macy, JC Penney and GE are some of the companies that you should stay way from. Keeping abreast of current news will help.

Next post I will touch on what to invest and what it means by diversification. Subscribe to my blog so you don’t miss any of my post. If you are interested in this subject I highly recommend that you Google it or do a deeper research.