Invest in yourself FIRST – 401K’s and Roth IRA’s


Book: The Money Book for the Young, Fabulous, & Broke (2005)

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So, if you really thought Vive’s Retail Diary would only cover my fav retail finds and greatest designer discounts, you’re sadly mistaken. If being prepared for your financial future doesn’t interest you, you should stop reading now. If  this topic intrigues you, then keep reading. I am not going to talk your ears off because I am fully capable of realizing that you could easily pull up other articles that will give very detailed and in-depth descriptions of 401K’s and Roth IRA’s (Individual Retirement Account). My purpose is to give advice to help you begin to build a better financial future.

I will hand out free advice the last Monday of every month – Money Making Monday. Why the last Monday of the month you ask? I’ll tell you. It is better to plan and prepare yourself for the weeks and months to come instead of being last-minute. Like one of my older sorority sisters used to always tell us – “Stay ready, so you don’t have to get ready”. Also, we are still in the month of January, so it’s not too late to start 2015 on a strong financial foot. One of my New Years resolutions was to learn more about to the stock market and to continue increasing my investments. If you haven’t set any financial goals for 2015 (besides the obvious of increasing your net worth), I highly I suggest you do.

I am also sure you’re wondering why and how this relates to retail and shopping – since this is Vivie’s Retail Diary after all. Well, I would be more than happy to tell you. Life costs money, shopping costs money, eating costs money, traveling costs money, at this point, just to breath costs money. Some wise words I was once told from a close family friend when I started working my big girl job was, ‘pay yourself first’. That doesn’t mean when that direct deposit hits you go buy a new Tory Burch bag. It means you literally pay yourself first by putting money away in some sort of savings account. When I get paid every week, the first thing I do is contribute to my savings account, Roth, and 401K. Until that happens, I can’t even consider going shopping. There are so many ways to save, there is no excuse for anyone not to have money put away for your future and emergencies. As women, I think it is imperative for us to have the tools to know how to be independent and handle our money, no matter our financial situation. Even if you only put away $50 every month, SOMETHING is better than NOTHING.

Now, let’s get to the fun stuff (like I said, I’ll keep it brief. Further reading and explanations are available by clicking the pink bold letters in the body of the post – not all, but most ). Once again, as I always say – I am by no means an expert, but knowledge is power. I read a lot and ask a ton of questions to educate myself. That is the exact reason I tagged Suze’s book under the photo above.  Not all the content will apply to your current situation, but she gives amazing REAL LIFE advice for people of our age. Some of the topics include: how to save for buying a house, paying off your credit card, how to avoid buying things you know you can’t afford, ways to invest, etc. I highly suggest reading this book.

What is a 401K plan? It is a savings plan sponsored by your employer for retirement. This money isn’t taxed until it is deducted from your account. A lot of you think – I am young. I don’t need to invest in a 401K or Roth IRA because I have time. You would be surprised to know that waiting a few years to invest can literally mean missing out on hundreds of thousands of dollars in retirement. Some companies will even match up to a certain percentage of your contribution. Yes, you might be annoyed that you’re contributing a certain amount each paycheck to your 401K, but think about it. After a while, will you really notice that money anyway? That 401K money would have easily been used on shoes, nails, drinks, you name it! AND the fact that your company MATCHES it! That is literally free money, who turns down free money? I know I sure don’t, EVER! A quick and easy example that Suze gives in her book is this:

You invest $300 monthly at an 8% annual return starting at age 25 ending your annual contributions at age 40 (15 years total). That account has $54,000 in it at age 40 which is worth $104,504 and continues to earn that 8%. If you stop adding money to that account, and continue to let it compound, by age 70, your initial monthly investment of $300 is now worth $1.05 million dollars. Amazing, I know. If you don’t know how to do these calculations, no fear – Vivie is here (per usual). You can play around with the figures and compounding interest rates here. There is so much more to know when it comes to investing in your 401K, I simply can’t explain it all here. That’s why I suggest reading books, articles, or even getting advice from your parents, loved ones, or a financial advisor.

Now as far as Roth IRA’s go, the compounding interest works the same. The difference between this and a 401K is that the money you contribute has already been taxed. So whatever you earn in your Roth is tax-free as long as you’ve owned that account for a minimum of five years. If you’re single (not married) and make less than $116,000 a year, you can contribute up to $5,500 a year. There are a number of rules and penalties you should look out for when it comes to contributing to your Roth. You can read about that here.  All in all, I think the Roth is a better investment than the 401K because it is essentially tax-free. BUT,  I would still invest in both if you can.

I hope this post was enlightening and hopefully changed your mind about investing at a young age. It really pays off and will make such a positive difference in your future. Now, go make that money, don’t let the money make you!


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