Friday Finance Facts

        Welcome back to my blog. I apologize for the brief hiatus. I have had a busy end to the Winter season, and I am looking forward to the start of Spring! I had to take a quick break from posting updates until I could get caught up mentally. Trying to handle work, family, school, and life became overwhelming there for a few weeks. Now that I've had time to regroup, I feel refreshed and ready to put up some more new ideas to try and help you on your way to financial freedom. Of course, the basics still remain the same when it comes to money and building wealth. Rarely does a new idea show up that changes the fact that building wealth is a process and very few secrets exist that work out as well as patience and persistence in saving and investing. With that in mind, I'm going to introduce some ways that I believe you can stay focused on the basics while still making it fun for yourself.
        First off, the key for being successful with your financial life is having a goal for what you want to accomplish in the first place. I don't know anyone who saved a large retirement nest egg and had no idea how it happened. These things come about through intentional actions over an extended period of time. Not everyone has the ability to make it happen on their own and that is where a good financial adviser can go a long way. A small monthly payment to a financial adviser can take the stress out of managing your money and still allow you to get where you want to go. I'd recommend trying to find one who is local and that you can trust. Getting into bed with a large financial institution usually leads to higher fees that will eat into your returns. I'm speaking generally on that subject, but it usually remains true across the board. The best thing you can do, in my personal opinion, is to search the Dave Ramsey site for an Endorsed Local Provider of financial services. These people are vetted by Dave and his team and typically follow his more long-term outlook to investing for retirement. Anyone who is more interested in selling you on products that you don't understand is someone I would avoid altogether. Many people have been mislead by these type of investment managers.
        Now that you have decided what you want to do and how you want to do it, the next step is to build a plan around your goal. For me, the benchmark of a good retirement plan starts with a 401k. If you're lucky enough to have one sponsored by your employer, you need to take advantage of it. The pretax contributions will help to lower your annual tax liability and help you to invest a larger amount of money since it has not been reduced by taxes. Yes, your withdrawals at retirement are taxed, but this is only because the taxes have been deferred up until that point. The importance of this type of retirement account, to me, lies more in what it is capable of doing. This will allow you to invest in a wide range of mutual funds that expose you to the stock market and other investment markets without having to make all of the decisions of who to buy. The fund managers take your contributions and buy into multiple stocks. Some funds even include several thousand companies. Talk about diversification! You really can't come close to that on your own. It will also allow you to invest in international markets. Most of us here in America are interested in the stock market in the USA. However, international markets represent huge opportunities for growth in some cases. Getting part of your retirement in international stock will help you to counter a downswing in domestic markets. Typically, when one market is down, there is another market that is up! Take advantage of all markets if you want to maximize your retirement potential.
        My next recommendation for a solid retirement plan is a Roth IRA. They have gained in popularity in recent years. The main reason for this is also related to tax advantages. This account is basically the opposite of the 401k. Contributions go in "after-tax" and grow tax-free! This means that your gains go farther simply because of the avoidance of taxes. Let's not forget that taxes typically go up over time. Throw in price-inflation and interest rates on top of that and it makes the Roth IRA an absolute must for your retirement portfolio. The only negative is the contribution is limited to a yearly amount of $5,500. Obviously, it can hurt the federal government if they are not able to collect any tax revenue on people's retirement accounts, so this makes sense to me. Regardless, the $5,500/year over a long period of time will turn into a much bigger number once the tax-free gains are factored into the equation.
        These are just two examples of very smart long-term investments that will pay off over the course of your journey to retirement. I feel very strongly about the fact that retirement is actually a dollar amount and not an age. The faster you are able to reach a set amount of money that you can use to sustain your income for the remainder of your life, the faster you are able to retire. With that in mind, make sure you are saving as much as possible for retirement. Today's stuff and fun times are always nice, but just imagine how many fun times you can have after retirement if you delay the satisfaction and put that money toward something that will earn you more money and not just depreciate and be thrown away later on down the road. Again, get started on a 401k. If you have the means, open a Roth IRA to go with it as well. These two accounts are critical to a solid retirement. If you just so happen to be well off enough to maximize both, then look for other ways to put money back that will grow over time. The key is to let your money go to work for you so that you can one day no longer work. Hope everyone has a great weekend. Thanks for reading.