The Friday Feast ~ the 24th of February

Published February 24, 2017   Posted in Friday Feast

The personal finance community is filled with so many talented writers and inspiring families in search of something better out of life than the traditional society-approved plan of buying lots of stuff and retiring in your 60s if you’re lucky.

Here is a look at the best of this week’s personal finance blogs.

In this episode of Friday Feast: Mr Tako Escapes, MakinCents, Frugal Desperado, Financial Mentor, The Grounded Engineer, Abovare, Jessica Moorhouse, Financially Alert, Steveonomics and Mark Manson. (more…)

The super secret key to success: Ask!

Published February 22, 2017   Posted in How to Think

Hard work. It’s great in theory, but the years I spent meandering my way through corporate America taught me that success very rarely resembles the fluffy fairy-tale idea that success comes to those who “work hard”. Or even “smart“.

More times than not, success comes to those who ask for it.

If you think that you are ready for a promotion, ask for it. “But it’s outside of our promotion cycle,” you may retort. Who cares. Ask for it anyway. Your employer recognizes those who are proactive. Even if you don’t get a promotion immediately, the seed has already been planted. You’re setting the course.

Hard work is bullshit.

Okay, not entirely bullshit: If you come into work an hour late and twiddle your thumbs all day, you probably aren’t going to get a promotion. In fact, you should feel damn lucky that you even have a job. You do need to be at least somewhat productive. A positive contributor. A reason to collect a paycheck. As I wrote about before, it doesn’t take all that much to look good at work these days.

The idea that if you work hard, “success will come to you” is devastatingly attractive, but does not represent how businesses promote their staff. I used to be in the position to promote until I demoted myself. I’ve seen this work first hand – from both sides.

Success does not become you

Waiting for success to happen is a game that we will lose almost every time. Don’t wait for things to happen TO YOU. Instead, go after what you want. Be proactive and be sure that your employer knows your professional goals. Give them a reason to promote you. Quit waiting for good things to happen.

The longer you wait, the steeper your climb to the top.

Here, let’s get more specific.

Want success? Ask for success!

Good things come to those who ask for them. It’s remarkable. In fact, about half of my promotions and raises throughout my working career in corporate America have come as a result of me asking. Asking means you’re serious. It shows your organization that you are a productive team player who wants to contribute more (or feels undervalued). Either case can be incredibly persuasive.

Before you ask, be sure to understand the following tips.

Know what you want

Before asking for success, know what success means to you. For example, do you really want a management position? If so, know what you’re getting yourself into – at least to the best of your ability. Picture yourself doing the job, not just enjoying the title. I fell into this trap, and trust me, it was a painful lesson! More on this tip below.

Be confident

Believe you’re the best motherf-er in the room. Seriously, believe it. Those who exude confidence are natural leaders. It shows. Even if you’re wrong, the confidence to make a decision and pursue it full force is what separates followers from leaders. Remember: I’m talking about confidence, not arrogance. Don’t be a prick. This isn’t about talking over people or shutting down conversation or debate. In fact, it’s the opposite. Start the conversation and lead the debate with respect and honesty. Engage those around you and get them involved.

Basically, do what leaders [should] do, even if your official title doesn’t include “manager” or “director”…yet.

Act like the person you want to be

If you want to be the leader, act like the leader. Don’t ask for a promotion into management and then continue doing what you’ve always done. Take the initiative. Volunteer to help your coworkers. Brainstorm ideas. Offer your suggestions. Be up front about your willingness and ability to lead. Help your manager in any way that you can. Most people are all talk and very little action. Make it obvious you’re about action by separating yourself from the pack.

One of the best pieces of advice I’ve ever received came at one of my former jobs. I asked for a promotion into a position that sat vacant, but the organization was not ready to make a change – yet. I asked what I can do NOW to better equip me for the promotion later. The answer I got was simple and direct: “Pretend you have the job“. I stepped up and accepted the responsibility of that position before I even had it. Within a couple of months, the position was mine. True story.

Do not fear failure

Those who are afraid of failing rarely get to where they want to be. The reason is simple: When people fear failure, they resist taking risks. They refuse to put themselves out there. They remain huddled in their comfort zone waiting for something to happen to them.

This natural but devastating habit keeps us from taking risks and going after what we want out of fear that things might not work out perfectly. I have a secret to tell you: Perfection is unattainable, so stop trying to get there. You WILL fail. It is a natural part of life. I’ve failed. My neighbor has failed. We ALL have failed. It happens. Get over that fear – fast.

If you want something bad enough, go-the-fuck-after-it. Make it happen. If you fail, you fail. Big deal. Try again next time.

Be prepared to back it up!

If you stroll into your manager’s office to ask for a raise, be ready to back up your argument with facts. Pick out the times where you went the extra mile to help on a project. Those 60-hour weeks should count for something. That uncompromising deadline that you met? The report you pulled out of your ass but knocked the socks off of that client? The new business you brought in? Yeah, this stuff.

Before meeting with your manager, know your facts. Rehearse. Play devil’s advocate and practice your answers to likely questions or concerns from your manager. Also, decide what you’re willing to compromise on. If you ask for a $10,000 raise but only get $5,000, is that good enough? Be direct, firm and confident.

Don’t look stumped.

Remember: Even if you don’t get what you want immediately, the seed has already been planted. Your manager knows what you want, and organizations tend to have more flexibility in how they promote than they care to admit. If your manager is afraid to lose you, he or she may go to bat for you to make sure you get what you want during the next raise cycle.

If a promotion comes down to a choice between two equal people, the person who asked for it will nearly always get it. Guaranteed.

Be careful what you ask for because you just might get it

I wrote about my high-level IT directorship position before, but it is appropriate to rehash here. At the time, I spent the last eight years of my working career as a follower. I was ready for additional responsibility, and there was a sea change in the organization. The position was mine because I asked for it.

Unfortunately, I soon discovered that high-level management isn’t for me. I hated answering questions to unknown problems. The organization wanted commitments to unreasonable projects and demanded acceptance to policies and procedures built by those without a shred of information technology experience. Some days, it was grueling. And, my staff had no idea.

The performance reviews were mind-numbing. My staff didn’t care because it was a check in the box. I didn’t care because it was a check in the box. Human Resources didn’t care because it was a check in the box. Management nonsense, day after day. Paperwork. Problems. Meetings. Coercion.

I was blinded by the title. I wanted to try my hand at being “the guy”. To call the shots. To make the decisions. Finally, to be the guy that everyone else smiled around.

Management isn’t for me. I tried it. I could not get on-board with doing that job for the rest of my life. I left my position and pursued a work-from-home job that paid better and lead me straight into retirement. I decided what I wanted and I went after it.

Moral of the story? Be careful what you ask for. Whether it’s more money, a promotion or anything else, be prepared to do the job. To put up or shut up. You may have a whole new set of problems to content with. More responsibilities. Later nights. Longer weeks. More travel.

You get the idea. Be prepared.

Edit: Based on a comment from Mr. Tako Escapes, I feel compelled to mention that some organizations may retaliate against your request for more money. While in my personal experience this has been the exception rather than the rule, it can happen. Know your organization well. I might argue that if your organization would retaliate against your request, it may not be the right place for you anyway.

Have you ever asked for a raise or a promotion? If so, how did it go?

What if we gave everyone a guaranteed basic income?

Published February 20, 2017   Posted in How to Think

Try this one on for size: Would a basic income solve our nation’s social problems by blindly cutting checks to every person of legal working age and nixing expensive social programs like welfare and social security?

It is a profoundly interesting topic, and debatable until we are blue in the face. Studies from around the world have attempted to uncover how realistic a basic income would be, but few of them have led to any credible conclusions.

Would a basic income solve our problems?

In the United States, we have a slew of social entitlement programs and policies designed to keep people from literally dying off in our streets. Welfare exists for those who qualify, the “temporary” (but very permanent) Social Security program provides some economic stimulus for our retirement. And then we have unemployment benefits, minimum wage, food stamps and other policies that supposedly help provide a basic standard of living – funded in large part by the middle class.

Sadly, these programs are buried underneath a gigantic mountain of bureaucracy that costs the American taxpayers billions of dollars to fund. Not only do the programs themselves cost money, but Americans also fund the administrivia required to run them. Like gas for your car.

The spending is incredible, but the bureaucracy might be even worse.

A basic income, proponents argue, would essentially remove all of these programs and replace them with a simple, non-bureaucratic solution: A monthly check, in the exact same amount, sent to all legal adults in the country – a Basic Income.

Done. No unemployment benefits because the monthly check would, technically, remove the need for a job. No social security because, once again, the basic income would continue until death. No “retirement” from the government check.

In theory, we could still work if we wanted to earn more than the basic income amount. Regardless of choosing to work, every adult still gets a monthly check.

Would a basic income destroy our society?

I have several observations, but even more questions.

At first glance, this sounds like a productive conversation. Removing our nation’s social entitlement structure simplifies government, lowers overhead and reduces fraud. Rich or poor, we all get the same check for the same amount. No qualifications. No income verification. Documentation not required. It’s automatic. Most social workers become unemployed overnight (with a basic income!).

We are no longer treated like children in our own country. We pick and choose what we do with our monthly check, and if we make bad decisions, we shoulder those consequences. The government has already done enough by providing a basic income. The rest is on us. If we fuck up, we fuck up.

But…

Would a basic income cost the American taxpayer LESS than the cost of our current system of complicated and frequently-abused social services?

Would the American people largely quit their jobs? Who among us would work at grocery stores or Walmart if we all received free money from the government every month? This study from the 1970s did find a decrease in work effort, but only a modest reduction.

How do we handle people with disabilities? They will have requirements that not everybody has and may need additional resources to meet those requirements. Bureaucracy.

How would a basic income affect government revenue? If enough people quit work or reduce their number of hours, would revenue decrease to the point of concern? Naturally, the government would also get smaller by eliminating our entitlement structure – requiring fewer resources to function.

Would immigrants instantly become eligible for the basic income check? If so, how would the United States prevent a giant influx of immigration that may significantly reduce government resources?

Would a basic income kill innovation?

I believe that the incredible technological progress of the United States is due, at least in part, to a capitalist-based system that rewards hard (smart) work, innovation and progress with money. The more we succeed at what we “do”, the more money we earn to enjoy our lives.

Would a structured basic income kill our incentive to innovate? As our technological revolution hums along, what affect would a reduction in workers have on our ability to continue advancing as a society?

Or, perhaps we have advanced too far, too fast?

What do you think?

Let’s hear it. Do you think that a basic income would work? Is it a less bureaucratic solution than the United States government’s social entitlement structure?

Would YOU personally choose to work if the government provided you with a basic income?

The Friday Feast ~ the 17th of February

Published February 17, 2017   Posted in Friday Feast

The personal finance community is filled with so many talented writers and inspiring families in search of something better out of life than the traditional society-approved plan of buying lots of stuff and retiring in your 60s if you’re lucky.

Here is a look at the best of this week’s personal finance blogs.

In this episode of Friday Feast: Rockstar Directory, 1500 Days, Money Mow, Six Figures Under, The Tireless Worker, Cait Flanders, Penny and Rich, Anti-Groundhog Day, The Money Speakeasy, Northern Expenditure. (more…)

I paid off my mortgage in less than 8 years

Published February 15, 2017   Posted in Guest Posts How to Think

Happy Wednesday, everyone! I’ve made it no secret that I hate mortgages – both having them AND paying them off. But once they are gone, the potential to build some serious net worth skyrockets. Today, I bring you a guest post by Rob from Mustard Seed Money on the ups and downs of wiping his mortgage clean. Take it away!

I was always a different kid when it came to money. Most of my friends would spend all their money on baseball cards, music, or food. Meanwhile, I abhorred spending money.

It probably had to do with the fact that I didn’t receive a steady allowance growing up. At times, my parents would start one, and then quickly it would go by the wayside. I’m not sure if it was because they expected me to complete my chores just as a member of the family, or if there were other factors involved, but I never knew when I would see another dollar come my way.

As a semi-resourceful kid, the only way that I knew I could make a good chunk of money was in the wintertime when it snowed. I lived in a really large neighborhood, so there were many prospective customers. This was before people gravitated towards snow blowers, so my friends and I would shovel
driveways all winter long and divide the profits. I remember, one winter weekend when I made $320. Though I was utterly exhausted, I felt as rich as any millionaire at that moment. I may or may not have spread all that money onto my bed and laid in it just to see what it felt like. But even as a self-made
hundredaire, I don’t remember wanting to spend any of that money. I guess I’ve always been a saver.

College Decision

Fast forward a few years, and I was excelling in baseball. When senior year rolled around, a couple schools from out of state offered baseball scholarships to me. In discussing it with my parents, they said I could attend any school that I wanted, but they threw out another small caveat. I would be responsible
to pay the difference between the in-state school and the out-of-state tuition if I decided to go somewhere out of state.

It came to a head when I received an offer to play baseball at an Ivy League college. Even with the scholarship, I would have still had to pay almost $20,000 out of pocket every year. This meant I would have had to take out some massive student loans.

Racking up $80,000 in debt was just too much for me to grapple. I decided to attend the state school where I lived, which unfortunately ended up baseball career since they didn’t offer me to play there. But, I do believe it was a wise financial decision.

Community College

In order to defray some of the college costs and to graduate sooner, I attended community college during summer breaks. My thought process was, I could work in the summer and make some money, or graduate a year early and make way more money. To say I was a bit of a math and investment nerd is an
understatement. While I had a great time in college, I was focused on the future, namely, securing a job and owning my own home.

Fresh Out of College

I obtained a great job right out school, so obviously, the next step for 22-year-old me was to buy a house. Hopefully you’re picking up on my sarcasm. But this is what I thought was the next step in the game of life. It took a while, but I finally found my dream house located a couple of minutes from work. Best of all, it was a brand new construction, so I could pick out all the designs myself.

In Over My Head

Here’s the thing about the house– it was way beyond what I could actually afford. Sure I put down 20% for the house, but I also had a $400,000 mortgage. Yes, I got the mortgage before banks were actually checking documents. But even so, who lends a 22-year-old kid $400,000, a year out of college?

Getting Roommates

I justified that I would be able to grow into the house with a family down the road and that my earning potential would also grow. But in the meantime, that meant getting roommates. Lots of them. I was fortunate that I was able to have a couple friends in the area and a work colleague who lived in my
home and paid rent.

Roommate Horror Stories

Their rent payments helped to put a significant dent in my mortgage. Anytime a roommate would move out, I would scramble to find a replacement. One time, a roommate situation did not work out so well. I had picked up a work colleague who seemed nice and normal enough. Unfortunately, he and another roommate did not get along at all. They were like oil and water. A fight even broke out, and I was afraid that they would damage the house between the mixture of alcohol and 250 lb men wrestling each other.

After that, we had a sit-down, and one of those guys decided it was time to move on. Hallelujah. However the nextOn d roommate that came along was unfortunately no better. After he moved in, he decided quit his job because he no longer liked his boss. He thought that he could find another job, but he was wrong. Soon enough, he could no longer afford the rent. I thought I’d be nice and let him stay in order to help him out a little. So here I was, spotting him each month, while he tried to get back on his feet, which in turn really hurt my finances.

Meanwhile, I was still contributing any extra money I had towards my mortgage because I hated it. I hated that I was required to live with guys that couldn’t get along, and I felt stuck in a job where I was losing motivation.

The final kicker for me was when this jobless roommate finally got a new job, he decided to buy a new car instead of pay me the back rent. Needless to say, I was angry. He moved out shortly after that, but not before I got paid in full.

Making Some Changes

So while some may think buying a house and picking up a couple of roommates is super easy, I can attest that even with the most vetted roommates, that things can and will go wrong.

After that I decided that, I decided to cut down on the roommates. The drama and issues associated with it started to wear on me. Plus, my salary had basically doubled since the time that I had bought the house and was making tremendous progress on paying down the mortgage. I ended up having a friend
as one roommate for another year until I got married in 2012.

Mortgage Pay-Off vs. Stock Market

Some may think I would have been able to achieve FIRE sooner if I hadn’t paid off my mortgage so soon. I actually ran the analysis and found that if I had invested the money into the S&P 500 instead of paying off the mortgage, that the difference would have been 0.1%. The 2000s were obviously a lost decade
for the stock market, so I was fortunate that paying off my mortgage didn’t hurt me more from an investment standpoint.

My last roommate moved out in September of 2012 when my wife and I got married. The final mortgage payment was made in December of 2012, and we were officially debt-free.

Would I Do It Again?

Absolutely, and let me share why. Over the 7 years that I had roommates, they paid close to 1/3 of my mortgage off. Through that help, I was able to pay off my mortgage in 7.5 years and start my marriage off debt-free.

Initially, my wife was unsure of my bachelor pad, but she was able to transform it in no time. I said goodbye to my old, torn up couches and dinged up coffee table. We hauled a big truckload of items to the local dump. The best part was we had extra money that she could use to buy new furniture since we
didn’t have a mortgage payment anymore.

Freedom and Flexibility

Because we were able to pay off our mortgage early, my wife’s income wasn’t essential in order to pay our bills.  She is able to serve as caregiver to her special needs sister full-time as we have greater financial freedom without a mortgage.

While my peers were having fun, I spent most of my 20s working hard and trying to get ahead. It was a grind. But I believe hard work pays off. I would take every hard assignment thinking that it would get me ahead no matter what. I figured if all my money was going towards a mortgage, why not work
harder to get ahead?

But, while I was working harder, I was not working smarter. I was taking terrible assignments that made me miserable. I had no time to take vacations, and I felt worn out all the time.

Traveling

When I finally paid off the mortgage, the first thing that I did was go to Europe with my wife. I had always dreamed of visiting Norway, where my great grandparents were born and immigrated from. It was definitely one of the most memorable trips that I had ever taken, and I thought, why didn’t I do this
before now?

When I got back, I purposed to seek out jobs that aligned with my passions and to focus less on climbing the ladder. I was able to find some really interesting projects, which also allowed me to indulge in my new passion of traveling.

Promotions

You know what the crazy part was? I have had 2 promotions since returning from that trip. Being able to follow my passions has increased my productivity and value at work to the point where I am now managing multiple teams within my organization.

With a mortgage, I was always preoccupied with needing to make more money. I wonder how different my career path would have turned out if I still had a daunting mortgage to worry about. I know I was on the road to burnout but was trying to push through it all for the sake of money.

On Our Way To FIRE

On our current trajectory, it appears that my wife and I will be able to achieve FIRE by 2020. We are planning out the potential adventures that we will have once FIRE becomes a reality. Of course, paying off my mortgage may have been a risky decision in hindsight if the market had taken off. Nonetheless, I
am thrilled with the end results of paying off my mortgage.

So, what do you all think? Are you trying to pay down your mortgage, or are there other debts you are tackling first? Please share your thoughts below.

No, we are not having kids; and yes, I am sure

Published February 13, 2017   Posted in How to Think

I don’t think I’ve ever engaged in a more monotonous discussion than one about having kids. And, it all began when I was a wee teenager, then fired up full-bore as I joined the workforce. Apparently, it’s abnormal not to want kids.

For the record, I previously wrote about why my wife and I are DINKs. However, as one of my astute commenters rightly pointed out, it almost came across as apologetic. I wrote that article before I “found my voice” on this blog. Here, I’m talking another stab at it – no apologies offered.

As I grew into a “senior teenager”, talk about life suddenly materialized – mainly, job, wife and kids. Boom, boom, boom – the big three, I guess, that everybody gets to deal with in the United States (and the majority of the world, I would imagine).

The job? Yes – I need to support myself. It’s a natural question to ask a teenager as he or she flirts with college and selecting a major. Inquiring minds want to know.

And the wife? Yup, I guess this is also perfectly natural, though a great many people do go through life single – either by choice or because they are an absolute bear to live with. I was perfectly happy living a single life until I met my wife. I also assumed that I’d get married.

I just didn’t know exactly when. Needless to say, I didn’t rush the process. I got married at 33.

And then, kids.

I never wanted kids

Even as a teenager, I harbored absolutely no desire to raise children. It just did not appeal to me. It’s not in my blood, and I’ve held pretty firm to that throughout my life when people ask me about kids. But as a teenager, it was apparently “just a phase”.

I mean, what teenage boy thinks about raising children? I’ll come around, they said.

The kids discussion became more real as I entered the workforce in my mid 20s. Now, I suppose, was the time that the majority of my co-workers had their kids and, naturally, it was assumed that I’d follow suit. “So, do you think that you’ll have kids?” they would ask.

“No, I’ve never wanted kids”.

Oh, I thought the same thing when I was younger. You’ll change your mind“.

Rinse and repeat – more times than I can possibly count – up to and including a dinner engagement I had just a couple weeks ago. I’m thirty-freaking-five, mind you.

After hearing about our early retirement plans, I was asked, “So, do you guys think that you’ll have kids?

“Nope, we won’t be having children”.

Oh, well you’re still young. There is still time“.

Pardon me, but F-you.

Maybe – just maybe, kids aren’t for everyone. Why is it so tough to believe that someone may not wish to raise children? It feels like I’m required to want kids. I don’t.

I never have. Even through all those years and reassurances that “I’ll come around”, or change my mind, or comforted with the knowledge that there’s still time, look at me now. I’m 35 and still don’t want kids. I haven’t “come around” because there is nothing to come around to.

My wife and I are both strongly agreed – we have no interest in raising children. Sorry mom, you aren’t getting grand kids from me. Ain’t gonna happen.

Why do we assume all people want kids?

I’ve been called selfish and self-absorbed because I don’t want kids. A narcissist.

This blog is about questioning the norm. Go to college, get a job, get married, have kids, spend lots of money and retire around 65 is the norm. Most of us in the personal finance community recognize that the norm doesn’t work well for everyone. Some of us have found better ways to live our lives. For my wife and I, that happens to include a lack of kids.

But, this question has plagued me for many years. I understand that having kids perpetuates the species, and raising children is a part of our DNA. Many of us are born with the innate desire to raise children because, if we weren’t, none of us would be here.

However – A desire to raise kids isn’t in all of us. In fact, I believe this desire is absent from more of us than we care to realize. Many end up having kids anyway because, well, that’s what you do.

It’s okay to choose otherwise. At least…it should be okay.

I admit that this post is part-rant and part-question. I really am tired of people assuming that I’ll eventually come around and want kids. It is not going to happen. It never will happen. Kids aren’t for me, plain and simple.

I will not change my mind. I will not come around.

Why does society steadfastly assume, even though years and years of saying “no”, that people will still suddenly change their minds?

A few ideas:

  • External factors change our minds; ie: we meet someone we love who wants children
  • A powerful event might change our minds (like saving a child’s life, etc)
  • We feel an increasing fear of “being alone” as we grow older?
  • Perhaps we want to feel needed and to nurture?

Honestly, I don’t know.

Challenge the assumption that raising kids is “normal”

Make no mistake about it – there is absolutely nothing wrong with raising kids. After all, it does perpetuate the human race. They carry on the family name. They give us a feeling of immense love, satisfaction and companionship. That’s all great.

Sadly, far too many unfit parents have kids. We’ve all seen examples of this in society. Parents yell and scream at their kids. Some even hit them. Many do not have the financial basis for supporting, nurturing and raising another human being. Others are flat irresponsible.

Child Protective Services protects millions of children nationwide. Millions! Yearly, CPS checks up on more than 3 million children who have been abused or neglected, and these are only the cases that we know about.

Of course – most kids are raised in loving families. I was. But far too many aren’t, and society’s insistence that CHILDREN MUST COME! isn’t helping.

Raising children is a personal choice. It needs to be made independent of societal pressures. After all, it’s a lifelong decision that comes with responsibilities and challenges. Our kids are too important to bare under pressure. That is unfair to the child.

If raising children is right for you, that’s great. But, it’s not for me.

Society – please stop asking me to have them. It won’t happen.

The Friday Feast ~ the 10th of February

Published February 10, 2017   Posted in Friday Feast

The personal finance community is filled with so many talented writers and inspiring families in search of something better out of life than the traditional society-approved plan of buying lots of stuff and retiring in your 60s if you’re lucky.

Here is a look at the best of this week’s personal finance blogs.

In this episode of Friday Feast: Mighty Bargain Hunter, Personal Finance King, Debt Ascent, The Money Wizard, Fireball Finances, Live FrugaLee, Millionaire Before 50, Prairie Eco-Thrifter, Max Your Freedom and Mixed Money Arts. (more…)

10 simple steps to invest in a Roth IRA

Published February 8, 2017   Posted in How to Save

Hey you investment loving number-crunchers! I’ve got a guest post today from Andy Hill who runs the Marriage, Kids and Money podcast. Sweet program that’s both clean and fun. And best of all, I was on it! Anyway, today Andy is talking Roth IRAs. Give it up!

The magical Roth IRA … You’ve heard that you need one. Or if you have one, you’ve heard that you should be taking full advantage of it. What is so excellent about a Roth IRA?!

For starters:

  • This retirement account grows tax-free. Anytime you can get Uncle Sam out of your pocket, you’re winning when it comes to retirement savings.
  • You can withdraw 100% of your contributions at any time without penalties or taxes.
  • Your options for investing are plentiful including mutual funds, bonds and real estate.

Tax-free growth, flexibility and a multitude of investing options are great descriptions when it comes to retirement planning. If you’re convinced (or at least intrigued) and you want to start a Roth IRA, here are 10 simple steps that can help you plan for your future today:

1. Make Sure You’re Eligible

The Roth IRA has some age, contribution and income restrictions that you should be aware of before you open your account. As of this writing, here are some of those 2017 Roth IRA guidelines:

  • If you’re SINGLE and you make more than $133,000 per year, you’re not eligible.
  • If you’re MARRIED, you file jointly and you make more than $196,000 per year, you’re not eligible.
  • $5,500 is the max annual contribution limit for people under 50
  • $6,500 is the max annual contribution for people over 50

I’d venture to say that the majority of Americans qualify under these guidelines. If you fit the bill with the above information, let’s move on to step 2!

2. Have an Emergency Fund in Place

Don’t start saving for retirement in your Roth IRA until you have a 3-month emergency fund in place. God forbid your car breaks down, you lose your job or you have an expensive home repair … and without an emergency fund, you’ll feel forced to take it out of your retirement account. BIG NO-NO! If you take money out of your retirement early, you’ll be hit with huge penalties and taxes. It will negate all the hard work you put in.

Ensure you have enough saved up in a separate savings account that will cover you for these emergencies. Getting on a budget will surely help.

3. Save Up for the Minimum Investment

For Vanguard and Fidelity (the only options I suggest for starting your Roth IRA), you’ll need to have at least $2,500 to get started. If you don’t have $2,500 today, that’s okay. Set up a monthly automatic withdrawal of $250 in your savings account and in 10 months you’ll be ready.  

This does three things for you:

  1. You now have the $2,500 you need. Score!
  2. It gets you in the habit of the doing monthly automatic withdrawals. Something you’ll have to do when you open a Roth IRA anyway!
  3. It will also help you get used to living without $250 per month – a good monthly starting deposit for your Roth IRA.

4. Choose the Right Investment Firm

I have used Fidelity for over 10 years. They have a wide variety of mutual funds to choose from and their online interface is intuitive and easy to understand. Best of all, they have a LOT of low-cost mutual fund options.

Vanguard is another industry leader that I trust because of the reputation it has developed. This company is completely geared toward helping its investors succeed in their retirement planning by providing simple, low-cost retirement solutions like index funds.

Now there are many other options to consider. Please do your homework. Read some of your favorite personal finance blogs, talk with your friends about who they use and weigh the pros and cons.

I like Fidelity and Vanguard because I feel like I have control over my money, I understand where it goes and I know how much I’m being charged. I do not receive commissions, affiliate kickbacks or any form of compensation from either of these firms. I’m just a fan.

5. Understand Expense Ratios

Most all mutual funds charge an expense ratio. This is a fee that covers the fund’s total operating expenses, management and administrative fees.

For example, a mutual fund like Fidelity OTC Port (FOCPX) has a 0.91% expense ratio. So for every $1,000 I have in my account, I’m charged $9.10 annually. You can see how this can add up over time. If my account grows to $1,000,000, I’m paying $9,100 per year.

The lower your expense ratios, the more money you keep in your pocket. The Vanguard and Fidelity websites make finding the expense ratios very easy. I looked up Vanguard’s VFINX and Fidelity’s FUSEX and did a screenshot for you below showing where you can find the expense ratios.

6. Take Advantage of Index Funds

Speaking of low expense ratios, I’m a big proponent of index funds. These are mutual funds that track the components of a market index like the S&P 500. If you invest in the Vanguard 500 Index Fund (VFINX), you are investing in 500 of the largest US companies much like the S&P 500. Because index funds track different market indices, it takes a lot of the guess work out of the process for you, the investor.

The major benefit of index funds is that they have a super low expense ratio. Using the Vanguard 500 Index Fund (VFINX) as an example again, the expense ratio on this fund is only 0.16%. So for every $1,000 I have in my account, I’m only charged $1.60 annually. If I get up to $1,000,000 in the account, I’m charged $1,600 annually. This is a dramatic reduction from the non-index fund example above.

Billionaires like Warren Buffet are big fans of index funds too! In fact, Warren Buffett gave this advice to his wife regarding his estate when he dies:

“… Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund … ”

I gave similar advice to my wife for the life insurance money if I were to pass away unexpectedly. If it works for Warren Buffet, it works for me.

7. Diversify to Win

You’ve heard the old adage “Don’t put all your eggs in one basket”, right? The same goes with investing for retirement. If you put 100% of your money in an S&P 500 index fund, then you are only investing in the equity of US-based companies (Large Cap). If the S&P were to decline, so would the value of your shares.

Balance out your portfolio by investing in options like bonds, international companies, small cap (another name for smaller and aggressively growing companies) and real estate (through REITs). By doing this, you won’t be as vulnerable to huge market swings. The mix is up to you and what is best for your age, income and your proximity to retirement.

A simple rule of thumb for stocks and bonds is as follows:

120 – YOUR AGE = STOCK PERCENTAGE

For me this would be:

120 – 35 = 85% Stocks

So based on that rule of thumb, my portfolio would be based on 85% stocks and 15% bonds. I like to add real estate into the portfolio as well to diversify it even further. This works for me. It might not work for you. Here is the diversification breakdown that I use in my Roth IRA:

  • 50% Large Cap US Based
  • 15% International
  • 15% Small Cap
  • 15% Bonds
  • 5% REITs

As I get older, I will increase my bond holdings as that is typically a less volatile investment. The older you get, the more conservative you want to be so your money doesn’t all disappear in a big market crash right before you retire.

8. Consider Partnering with a Financial Planner

If you need help in laying out your portfolio or reviewing your current portfolio, consider partnering with a FEE-ONLY CERTIFIED FINANCIAL PLANNER (CFP). I put it in all caps because I do not recommend working with someone who gets a commission based on selling you specific products. Been there. Was burned. Don’t recommend it.

You can pay an hourly rate for someone’s review or development of your portfolio. Resources like XY Planning Network can help you find the right fee-only CFP that works for your situation.

9. Have Discipline to Invest for the Long Haul

Investing in your Roth IRA is a long-term play. There will be some major ups and downs in the market during the time you have your money invested. If you get all freaked out during another recession and pull your money out, you’re going to lose out on the big returns.

Have the discipline to stay the course. You can do this in a “set it and forget it” way through dollar-cost averaging. This is a fancy way of saying you make regular, consistent and automatic contributions to your account each month regardless of the share price. This way, you’re not tempted to “time the market” or pull out of funds when times get rocky.

10. Rebalance Your Portfolio Annually

Remember when we talked about the importance of diversification?

As your portfolio grows, your allocation percentage will begin to shift as well. Let’s say your original asset allocation was 90% stocks and 10% bonds and it was a great year for the equity market. After year one, your portfolio might have shifted to 93% stocks and 7% bonds. This can easily be corrected by selling your stock mutual funds and putting the proceeds into your bond mutual funds.

Also, as you get older and near retirement age, you’ll want to adjust your allocation appropriately (120 – YOUR AGE = STOCK PERCENTAGE).

I’d recommend you do this annually. If you need some help with this, ask for it from a fee-only certified financial planner. If you’re going to go it alone, set a Google Calendar alert for the same time each year when you can spend some dedicated time reviewing and rebalancing your portfolio.

The Roth IRA is an essential tool to have on your journey toward retirement. By following those 10 simple steps, my wife and I are maxing out our Roth IRA accounts at $5,500 per year and our accounts are growing consistently. We still have quite a few years before we reach retirement, but at least we know we’ll be ready.

How close are you to retirement? What has been the best asset allocation for you?

Andy Hill, a mid-30’s father of two living in the metro Detroit area, pens the MarriageKidsandMoney.com (MKM) blog and hosts the MKM Podcast taking you through the trials and tribulations of being a young parent and husband who is planning for his family’s future and winning with money.

The truth about SSL and SEO

Published February 6, 2017   Posted in Blogging

Ever since Google announced that SSL-enabled web sites may see a small boost in search result rankings, the blogging community has gelled over getting their web sites “secure”. In the midst of the raucous, misinformation about SSL and the true impact it has to blogs floods the discourse. Here’s the truth.

Several years ago, Google began to experiment with using the presence of a Secure Socket Layer (SSL) certificate as a rankings signal. In other words, web sites that contain an SSL cert may be ranked higher than those without SSL. Google officially began including SSL as a rankings signal in 2014.

According to Google, this ranking signal affects less than 1% of global search queries.

As I began to consider buying a certificate for ThinkSaveRetire.com, I discovered that the jury is still out on any real SEO benefit to using SSL, and quite a number of assumptions about SSL are flat out wrong. It may not be worth the effort, especially after 2.5 years of running a fairly successful blog.

For instance, this Quora thread seems to suggest that SSL is integral to securing your site and preventing it from getting hacked, and will improve your Google search rankings.

Largely, it’s not true.

How SSL works

SSL encrypts communication between the web server and the user (you). That’s it. In practice, this prevents a malicious user from intercepting and reading packets of information sent between the server and the user. Retailers and other web sites that handle sensitive information need to support SSL to prevent customer information from being stolen.

Here’s the process at a high level:

  1. You access an SSL-enabled web site (ie: https://www.amazon.com)
  2. Your browser requests a copy of the web server’s SSL certificate
  3. The web server sends your browser a copy of its certificate
  4. If the SSL certificate is trusted, the web server will send a digitally signed acknowledgement and begin two-way encryption between the web server and the browser

Because all data in an SSL session is encrypted, it cannot be stolen and read by a third party. This helps to protect usernames and passwords, credit card numbers and other sensitive information from theft during transmission. All financial institutions and online store fronts support SSL.

However, SSL certificates do very little to “secure” your web site. 

They do NOT prevent your web site from being hacked. It does not prevent denial of service attacks either, which happen when a collection of web servers flood your web site with requests in a focused and coordinated attack, forcing the server to collapse. I would even argue against the notion that SSL protects our privacy to any large degree.

SSL-enabled web sites are not necessarily “safe”. Many phishing scams, for example, support ssl-enabled web sites. It also does not mean that your personal information is being stored safely behind the web server (ie: in encrypted or safe database). SSL only protects data in transmission.

In short, SSL provides a very, very small security benefit in the overall picture of online security.

What about trust? A certificate from a trusted certificate authority “proves” that the web site is owned by a real person with some personal credentials and a credit card. This trust component could make an impact for some web sites, but I would argue that – especially for blogs that only serve up content, the trust benefit with a certificate is hit-and-miss…at best.

Do YOU look for the “https” when you’re browsing personal finance blogs?

Does SSL actually improve SEO?

After countless hours of research, I can only conclude that the answer to this question is: inconclusive. Here is an SEO study of 10,000 domains, and the answer they came up with was…somewhat less than data-centered: “Yes, because Google says so”.

Not yet convinced? Me either. Here’s another study that found a “moderate” increase in SEO ranking, but also warns bloggers not to install an SSL certificate solely for the ranking benefits. If you’re thinking about starting a new web site, go ahead and use SSL. Otherwise, it ain’t a big deal.

A Moz study found a very low correlation between higher rankings and SSL.

Impact of https in SEO | Source: moz.com

Where does this leave us? It means that any benefit to SEO that a certificate has is minimal, and even those benefits are tough to quantify.

Does SSL negatively affect Adsense revenue?

Recently, I discovered that bloggers saw a significant hit to their Adsense revenue after switching over to SSL. This is because Adsense requires that SSL web sites also support SSL-compliant ads. Google maintains that most ads are compliant, but users across the Internet have reported widespread reductions to Adsense revenue.

Financial Samurai reported on this issue earlier in January: “I spoke to the folks at Adthrive, and they said they’ve seen publishers experience a 30% to 90% decline in ad revenue.” Ouch.

This used to be an issue in the past. I have no hard data that indicates one way or another whether this problem continues to exist.

My personal beef with the SSL rankings signal

I vehemently oppose using SSL as a rankings signal, for several key reasons:

  1. It seems arbitrary. To reward or penalize a web site based on unrelated qualifiers to the search query and content quality seems wrong.
  2. I reject the notion that SSL makes web sites safer. Like I mentioned in this blog post, SSL only encrypts data in transmission from Point A to Point B, which is a relatively tiny element of overall web site security. Developing secure web sites is a blindingly complex and sophisticated subject and cannot possibly be solved by slapping a certificate on to a web site. If only it were that easy.
  3. It makes bloggers spend money for no practical benefit. Trusted SSL certificates are not free. Prices range from around $60 a year to hundreds of dollars (or thousands!) depending on the certificate’s capabilities. For bloggers who don’t transfer sensitive information, this is completely wasted money on a capability that provides very little benefit.
  4. Encryption and SSL isn’t automatically “better”. I find it curious that many resources flatly state that SSL is nearly always better than non-SSL. Why? Because data is encrypted. Okay, so what? The vast majority of blogs do not require encryption and the overhead necessary to provide it. Whether this article was encrypted before it was sent to YOU is of very little concern to either of us!
  5. Encryption takes CPU resources. Although the impact has been minimized with the influx of inexpensive high-powered computer hardware, SSL web sites require additional processing power to support encryption. For blogs that don’t need encryption, these are wasted resources.

Moreover, I find it shocking that people find it shocking that the large majority of web sites do not support SSL. The majority of web sites don’t support SSL because the majority of web sites simply do not need it, and the additional CPU resources it takes to establish and maintain the encrypted pathway for data that does not need encryption is simply not worth the price of admission.

My recommendation: Do blogs need SSL?

Unless you are transferring sensitive information, blogs do NOT need to support SSL for any technical reason. Blogs, like this one, primarily transfer plain-text data in the form of words and paragraphs. Encryption provides almost no security benefit for most blogs.

But Steve, what if my blog already supports SSL?

No problem. SSL won’t hurt anything if you already support it (except for Adsense revenue?). And, according to Google, you might see a tiny advantage in search rankings if you happen to be one of the 1% of global queries that are affected by the ranking signal.

Should I buy an SSL certificate for my blog?

I cannot answer this question for you because only YOU know what is best for your blog. Personally, I believe that the only good reason to purchase an SSL certificate for a blog is because you think that Google will increase the significance of the SSL ranking signal in the future. Otherwise, I would pass.

Besides, migrating an existing blog over to SSL is not a straightforward task, as Untemplator found out recently.

Save your money and focus on writing high-quality content. Quality content is a much more important ranking signal that will always result in better search rankings for your blog.

I have no plans to purchase a certificate for ThinkSaveRetire.com any time soon.

The Friday Feast ~ the 3rd of February

Published February 3, 2017   Posted in Friday Feast

The personal finance community is filled with so many talented writers and inspiring families in search of something better out of life than the traditional society-approved plan of buying lots of stuff and retiring in your 60s if you’re lucky.

Here is a look at the best of this week’s personal finance blogs.

In this episode of Friday Feast: Rethinking the Dream, The Financial Diet, Millennial Money, The Naughty Investor, I Vigilante, Quiet Habits, Defined Sight, Money Glee, Untemplator, Rockstar Finance. (more…)