Why Wait? Be Smart, Just Start

Today I had an interesting conversation at work with three of my co-workers. One is a bit older, in his early thirties (I'll refer to him as John*), and the other two are around my age, they are both 25-years-old (I'll refer to them as Keith and Mark*). We were talking about our company's 401k and other retirement vehicles like the Traditional and Roth IRA. Warning: This is a lengthy post.

The Savers

John and I both contribute to our company's 401k retirement program. I contribute 8% of my pre-tax money into my account every month. John contributes a similar amount. We both have been working for the company for over 3 years and we've been part of the program from the start. We also get the 4% company match every month. (Our company matches 100% on the first 3% and 50% of the next 2%, it comes out to be 4% of our salary. It gets vested after you've been participating in the program for two years or by your third year of employment with the company, which ever comes first.)

The Naysayers

Keith and Mark have been with the company for about a year and a half. Our company automatically enrolls new employees into the program with a 10% contribution, but you'll have to opt-out or change the the contribution amounts yourself online. Keith decided that he didn't want to be a part of it and opted-out since he didn't think he was going to be at the company long enough to be vested. Mark had some money in it, then decided to contribute 0%, but didn't necessarily opt-out. He though the same - that he wasn't going to be around for two years.

We had talked about the company-matched 401k previously and I think we might have changed Mark's mind to at least contributing 5% so he can get the match. It's free money... you don't throw away free money. That's just crazy. I also mentioned to him that he can always roll his 401k into his next job's 401k or into his own IRA plan when he leaves. I just found it interesting that Keith and Mark had misunderstandings about the 401k and IRA. Keith also didn't know the difference between a traditional and Roth versions of both. We're engineers, we're usually good at finding information and mining data. Apparently when it comes to personal finance and retirement, we're not all great at finding and using that information.

The Excuses

Mark told us that he didn't trust our company enough to put money into the 401k (the savings program is managed by Hewitt, used to be Fidelity). He didn't think he was going to be around long enough to see the company match be vested. He's supposedly going to start contributing after his wedding. All this time he was missing out on free money. Assuming he makes about $70,000 per year, he's missing out on $2,800 every year he doesn't contribute to the 401k, let alone the potential growth of those matched funds in our company's employee stock options (that's where the company's match ends up and they're currently doing very well).

They both keep their money in a local savings account and not a high-yield one... probably making 0.01% if they're lucky. This money's not even keeping pace with inflation! If they're going to put it in savings, then at least put it in a high yield one online - I use American Express Personal Savings Bank. I currently get .85%. When I signed up a year ago, it was a bit higher at 1.3%. Not bad, but not great. That's why I have a Roth IRA with TD Ameritrade and my return is currently 8%. Better, but it needs some work.

I came across this article on Ramit Sethi's blog about people who procrastinate investing and saving, Code Words: Why We Don't Work Out. Be smart, just start. That's my advice to my coworkers. Compounding interest is your friend. Yes, you'll need to know a bit about where to put your money, but hey, we all need to learn this information and it's available all over the internet.

So check out Ramit's post and let me know what you think. Are you procrastinating or are you participating?

* Names have been changed.

Where Have I Been? Where Am I Now?

It’s been a while since I last wrote on this blog – almost a year and a half. A lot has happened. Here’s a bit of a run down by year.

2010

•  In June I moved into a new apartment and gained 3 new roommates. We were all engineers, two guys and one other girl. Fun times there, good stories that I hope to revisit in the future.
• My college boyfriend and I broke up a few hours after my last post on August 28. I was a bit heartbroken, but knew we weren’t meant to be together for the long run. It was good while it lasted and I was grateful to have him in my life. Moving on…
• I started seeing someone I used to date back in college. There’s probably a reason why we stopped dating the first time but it took me 6 months to remember it all again.

2011

•  It was good for the short time we were together, but I think I choked a bit. It’s funny that in December 2010 I wasn’t ready to get married or at least get married to that boyfriend, but in December 2011, I was singing a different tune. Post-college boyfriend and I didn’t work out for the reasons it didn’t work out the first time we dated and our relationship ended in March.
• I was living the single life-style with my guy friends and it was very expensive. I don’t regret any of it, but boy, all that eating out at restaurants killed my wallet and my slim figure.
•  I started going to a knitting group in May. I love the ladies and everything they talk about. I get to learn from their wisdom on child rearing and get a glimpse of their life and adventures. One of the ladies lives in the UK a few months out of the year since her husband’s family is there and he travels there for work every now and then.
•  I met my current fiancé, C, in July. We hit it off right away and I just knew. He was someone I can see myself settling down with in the future. He had a terrier, I had a terrier. We both come from families with money problems. There were more similarities and I might get into that at a later date.
• We moved in together on Halloween. It was snowing!
• He proposed to me in December and I said yes! Some would say that we’re moving too fast, but I think it’s the right thing for us. Besides, he’s 30 and I’m 25. I can hear the clock ticking.
•  I bought a new car! I gave my 2001 Chevy Malibu back to my mom and bought a 2012 Mazda 3 5-door (aka Hatchback). I love the car, not loving the finance manager at the dealership. That’s another story.

2012

• C and I are preparing for our upcoming wedding.
• I'm still at my first job after college.
• I'm thinking about going to grad school (paid for by my company).
• I'm just trying to be in the moment and live life one day at a time.

I added another section to My Money History - Where Am I Now. It's a bit more in depth about my life so far in 2012. I plan to update it every now and then. I might edit it and make it shorter or move some things around. So much to do on my first day back on this blog. I hope you join me as I try to capture my life in this blog.

The College Years

First I want to wish my lovely little sister, Joy, a very happy birthday!

It's been a very long time since I last wrote. I've been on a hiatus due to work reasons. After sitting in front of the computer all day at work, I just wanted to come home and not jump back in front of another screen. So I apologize for the long silence.

I wrote a new section to My Money History. It's called The College Years. I hope you enjoy reading about it. I plan on writing at least 3 times a week on this site. I've had a lot of inspiration over the past months and I'm bubbling up with stories and achievements. So come back soon!

Lessons Learned: The First Paycheck

Ah, the first paycheck. That paycheck was my green flag to spending. That paycheck supported my materialism. That paycheck never had a chance to make it to my savings account. Why? Because I made the classical mistake of spending it all before I paid myself.