Archive for Retirement

I Am Debt FREE!!!

debt free

Piggy Bank Will Be So Happy!!!

Yes, you read that right.  I am officially debt free!

It probably has been over 10 years since I have been able to say that statement, but I can finally say it once more.  In fact, I’m going to say it again… I AM DEBT FREE!!!

It feels really good to be debt free.  Now I know that any extra money that I have will go towards my savings and maybe, just maybe, I might be able to reach early retirement… early-ish.

The beautiful thing about all of this is that I did in less time than I have initially predicted.

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How To Spend Your Tax Refund Wisely

tax refund

Enjoy Your Refund!

Tax season is here and to many of us that means one thing… Tax Refund!

I know there’s a debate whether we should be getting a refund or changing our withholdings to get more on our paychecks, but that’s a discussion for a different time.  Let’s not rain on anyone’s parade and let us enjoy our refund for now.

We all enjoy getting a tax refund.  It feels like we just won a scratch-off.  One of the reasons we love tax refunds so much is because we like to spend money and this is extra money that we can spend freely… or so I thought.

I used to buy all kinds of stuff with my tax refund – I bought my motorcycle with my tax refund – and it felt good for a few weeks.

That good feeling slowly faded when all that money was gone and I still had debt and almost nothing saved.

If this sounds familiar, here are a few suggestions on what you can do with your tax refund that makes you feel good for a long time.

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What Is myRA?

myRA

Can myRA help?

We know about traditional IRAs and Roth-IRAs, but what is a myRA?  myRA is a new government-backed retirement account.  Last year, President Obama asked the United States Department of Treasury to create a new form of retirement account that could be used as a “starter” account for low and middle-income Americans who don’t have access to employer-sponsored retirement plans.

The program is not really designed to be your only form of retirement account, but a stepping stone towards start saving for retirement.

How Does myRA Work?

myRA works in a similar fashion as a Roth-IRA in which all contributions are made after taxes, and withdrawals are tax free. Contributions are invested in a United States Treasury security, which means you never lose your contributions.  The U.S. Treasury security earns interest at the same variable rate as the Thrift Savings Plan‘s (TSP) Government Securities Investment Fund.

This is a safe way to save for retirement, but it also means that the rewards are low. The average annual rate of return for this fund over the ten year period of December 2003 and December 2013 was 3.39%.

These returns are better than having your money in a savings account, but not better than investing in index mutual funds.  However, you can lose your money investing in index mutual funds, which is not the case when investing in TSPs.

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How Much Money Do I Need To Retire?

Need To Retire

When Will I Retire?

We all dream of that day when we don’t have to go back to work and we can enjoy our free time in retirementat least, I do.  We all know we need to retire, but how do we know if we have enough money saved to have a comfortable retirement?

That is a difficult question to answer because it depends on many different factors, such as your age when you retire, lifestyle, health, and how long you plan on living on retirement money.

There are dozens of retirement calculators that will tell us how much money we will need to retire, but most of them only makes my heart skip a few beats.  The numbers those calculators tell us are a little too high, at least for me.  My plan is to be able to retire early, but according to those calculators I’ll never be able to retire.

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10 Common Money Mistakes

Money Mistakes

Money Down The Drain

You would think that since we handle money on a daily basis we should be experts on money, but the reality is that we make a lot of money mistakes that lead to us losing our hard earned money.

If you read my story, you know that I made a lot of money mistakes that kept me living paycheck to paycheck every month.  Fortunately I have rectified some of those mistakes, but I’m still working hard to get on the path of financial independence.  Below is a list of common money mistakes I’ve made and that you should avoid.

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Asset Allocation – Where Do I Invest My Money?

Asset Allocation

What’s The Right Asset Allocation?

When I started my first job out of college, they told me I was automatically enrolled in the company’s 401(k) plan.  I just had to decide what percentage of my salary I wanted to contribute and where I wanted my contributions to be invested.  I then received a package from the company handling my retirement plan. There were pie charts and graphs and numbers that I didn’t understand explaining the different options I had to invest my money.  I looked at all that information and started to panic a little bit.  Where do I invest my money? I don’t want to invest in the stock market.  I’ll lose all my money.  The package also explained that if I didn’t choose anything then my funds will be placed in what looked like a savings account.  So I chose the default because I didn’t know what to do.

I now know that picking the right fund is really not that difficult when you know what to look for.  Here I am going to share with you what I have learned so we can have a better understanding of the choices available to us and about how to diversify our funds to lower our risk.  I will mostly touch on investing in our 401(k) but the information applies for investing outside of your retirement account as well.

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Retirement Plan Options

I don’t know about you, but I can’t wait until I don’t have to work anymore.  I get to wake up every day and do whatever I want.  No more rushing to get to work on time.  No more going to sleep early because I have work the next day.  No more only taking one to two-week vacations because I have to go back to work.  No more having  to work because I need money.  Oh wait, money.  I will still need money to pay for my Senior Citizen Water Aerobics class and for my month-long vacations.  Where am I going to get that money?

Water Aerobics

Jump in. The water is warm!!!

This is when retirement planning pays off.

We already know about compound interest, and our retirement accounts are the best places to take advantage of compounding.  I didn’t start investing as much as I should when I started working because I didn’t understand how retirement plans worked, and I missed out on eight years of compounding.  Start as soon as possible so you can get the most out of it.

There are different types of retirement accounts but we will only cover a few that everybody should know about.

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The Powerful Force of Compound Interest

“Compound interest is the greatest mathematical discovery of all time” – Albert Einstein.

  albert-einstein-about-his-quotes

 

He probably didn’t say that but I’m going to say it because to me, it was.  And this is how I plan to have a Million Dollars in savings one day.  Now, if you are looking for a way to get rich quick then this site is not for you.  Our plan is to slowly build our savings and not touch it to let compounding do its magic.  All we need is discipline and time… lots of time.  So be patient.  Just start saving early, often, and for a long time.

This is the one of the ways we normal working people become rich.

I decided to write about compound interest first because once we understand its power then all of our saving strategies will make more sense.  Read more