How I Will Be Rich

About a week ago I received a response to my post, “No Reason Not To Have a Roth IRA“, with some reasons to actually not have a Roth IRA.

Richard Wrote:

1) The amount you save each year for retirement does not exceed the amount necessary for full 401(k) employer match. I have decided calculated that I can save X percent each year for retirement. Since my employer matches 25% for that X percent, I would be losing out on an instant gain of 25% (not to mention that it otherwise would be after tax dollars) by putting the money into the Roth.

Whenever I have discussed this with friends, they say that if I’m only contributing up to their match, then I’m not contributing enough. To this I respond that my employeer (though this is rare) will match 25% on up to the government limit (15,500). So my X is actually a pretty hefty sum.

2) The other money I am saving (like for a downpayment) is for short term goals. For this reason I invest the money in an ING account. Although I could invest this money in an ROTH and pull it out when I need the house, what if the stock market drops right before I decide to buy this house. The one thing people neglect to mention about ROTHs is that although you can pull out your contributions, you can’t do that if the value of the account is below what you’ve put in. With my ING account I’m guarenteed (FDIC) to have the money I’ve put in.

I believe Richard makes some very valid points. In response to #1, I agree that if you have an employer matched 401K, you should definitely take advantage of that. A lot of employers do not offer this sort of benefit. I do believe, however, that a Roth IRA can be beneficial on top of the 401K. The downside of a 401K plan is that the tax is deferred and must be paid once you withdraw. With a Roth, you are paying income taxes before investing and you are not required to pay taxes on your capital gains. A lot of companies limit what you can invest in with your 401K funds as well. With a Roth IRA, you are limited only to what your broker provides. You can allocate your assets differently between the two.

As far as a response to your second comment, I do agree that a Roth IRA is not the best plan for saving for house. The point that I was trying to make is that those funds aren’t untouchable if you absolutely need to use them for a down payment. When purchasing a house, you are much better off coming up with a down payment without touching your retirement accounts. But your IRA is there if necessary.

-M

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I’ve decided to compile a list of blogs that I like. This is a list of sites that if read and followed may make you wealthier, healthier and happier. I know it seems like a lot but if you have a good blog reader, you can subscribe to them and then once a day browse through the titles and just come back to the posts that grab your interests. Originally I was going to make a list of sites to make you wealthy but due to the fact that we’ve launched a new site about health, I thought it would be appropriate to give you some blogs that I read regarding health and happiness as well.

Wealthy

1. Andy Beard -Search Engine Performance, Wordpress, Niche Marketing and Affiliate Marketing Tips
2. Blogging Away Debt - A great site about making money and reducing debt
3. Blue Hat SEO - Tips for marketing and Search Engine Optimization.
4. Blueprint for Financial Prosperity - Earn More, Save More, Live More
5. Boston Girl’s Open Wallet - A single 30-something Bostonian who is seeking enlightenment and control of her Net Worth.
6. Calvin Warr - Fun marketing ideas
7. Clever Dude - Personal finance advice.
8. Consumerism Commentary - More personal finance advice.
9. Copyblogger - Copywriting tips for online marketing success
10. Daily Blog Tips - Another great site that will help you make money blogging.
11. DoshDosh - Helping You Make Money Online
12. Entrepreneurs Journey - Another great site about building wealth through blogging.
13. Finance is Personal - Finance advice posting about 3 times a day. Always fresh material.
14. FiveCentNickel - More personal finance advice.
15. FreeMoneyFinance - Another great site for personal finance advice.
16. Frugal For Life - A site about frugality and spending wisely.
17. Get Rich Slowly - Some more great business and finance advice from a fellow business owner.
18. Hannes Johnson Dot Com - Make money online marketing on the internet.
19. Home Based Business - Online home based business opportunities. Free home business ideas.
20. I Will Teach You To Be Rich - Follow his advice and he may make you rich. (The first finance blog I started reading)
21. It’s Your Money - A Site about wealth building and personal finance.
22. John Chow - This guy wants to teach you how monetize your blog (By any means necessary).
23. Kyle’s Cove - Technology, blogging, WordPress, SEO, and making money online
24. Lazy Man and Money - Another great site for more personal finance advice.
25. Make Money Online The Quick and Easy Way - Watch the journey of one women going from stay at home mom to internet millionaire.
26. Matt Cuts - Great SEO information
27. Mighty Bargain Hunter - A site about being frugal.
28. Money, Matters and More Musings - Another great site about wealth building and personal finance.
29. MsDanielle - Internet Marketing, PPC, and Online Social Networking
30. My Affiliate Journey - Affiliate marketing
31. My Money Blog - A great site about wealth building and personal finance.
32. My Personal Finance Journey - Another really good site about wealth building and personal finance.
33. My Two Dollars - A place to discuss money for the rest of us.
34. North x East - A site with a lot of blogging tips.
35. Not Made of Money -A Site about saving money and frugality.
36. One Man’s Goal - Watch one man make the journey to become a full time blogger.
37. Online Marketing Blog - A blog about online marketing.
38. Personal Finance Advice - The name says it all.
39. ProBlogger - Want to make money blogging? This site can teach you how.
40. Pronet Advertising - Read about one man’s experiences in online marketing.
41. QuickSprout - Tips for marketing and Search Engine Optimization.
42. Search Engine Land - Learn about Search Engines.
43. ShoeMoney - Another site with ideas on making money on the internet.
44. Simply Thrifty - A site about being frugal.
45. StockTradingToGo - A great resources for investing tips.
46. The Digerati Life - Personal finance advice from a great writer.
47. The Simple Dollar - All sorts of personal finance advice.
48. Young and Broke - More personal finance advice.

Healthy

49. DietHack - A great site for health related articles.
50. FatBlokeThin - Losing weight the Buddhist way.
51. HealthMad - More tips to live healthy by many authors.
52. Healthy, Fast and Cheap - A site about cooking foods that are healthy, fast and cheap.
53. Her Active Life - A great site about eating healthy and excersize (great tips for men and women).
54. He’s Fit - A great site about eating healthy and excersize (great tips for men and women).
55. Live Live… Organics & Your Health - A great site with tips on healthy living.
56. Nurture Your Life - Another great site with tips on healthy living
57. Raising a Healthy Family - The name says it all.
58. Ririan Project - Tons of great tips to live a healthier lifestyle.
59. Sexual Health Buzz - A site about staying healthy while being sexually active.
60. Spine-Health - For those people who suffer from neck and back pain (Like I often do).
61. The Diet Pulpit - Eat healthy.
62. The Final Sprint - A great health site with a major focus on running.
63. Total Wellbeing - Healthy living for the body and mind.

Happy

64. 43 Folders - Personal productivity and ways to make your life better.
65. Brip Blap - A blog about life, family, career, personal finance, career, productivity, health and the environment.
66. Dumb Little Man - A group blog of people giving tips for anything and everything.
67. Genius Types - Creative Life and Money.
68. LifeHack - Another Site about pretty litterally, everything.
69. LifeHacker - Literally, A site about everything.
70. Pick the Brain - A great site about self improvement.
71. Scott H. Young - Another great site about self improvement.
72. Steve Pavlina - Personal development for smart people.
73. The Blog of Author Tim Ferris - A great site with tons of advice about everything.
74. The Consumerist - A Site about everything to make life better.
75. The Happiness Project - The name says it all.
76. The Positivity Blog - Be happy and be positive. Great Advice.
77. The Thinking Blog - Expand Your Mind.
78. ZenHabits - A site about organizing your life and becoming a happier person.

That’s my long, comprehensive reading list. As you can see, I read a lot of blogs. Feel free to comment on who else deserves to be on the list and what not. Check out these blogs and enjoy!

-M

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This is part of my ongoing theme “The 8 Step Process to Being Rich“.

So you’ve got that job and you’ve got an income flowing. Now you even have a Roth IRA with a good Index Fund. It’s time to open a discretionary investment account. This is an account where you put your money and invest it in whatever you want. Here you can deposit money and withdraw it as you please. Keep in mind, though, you will get taxed on your income before investing and you will get taxed on the interest you’ve made once you realize your capital gains. This account is for the money you aren’t putting in your Roth. You can only invest so much per year in to that so this is where you put your money that you want to invest once you’ve already made your Roth contributions. Lately, I’ve been looking at a company called Zecco. They seem to be a real great choice for a discretionary account because they have basically no fees for simply trading stocks.

I’m not one to give stock tips on any individual stock. In fact, I actually think it’s pretty foolish to go and invest in stocks because of a tips from a website or a friend or even a TV show for that matter. The only way to trade stocks is to do your own research. Read books on analysis and investigate the companies that you want to own. My personal strategy for investing in individual stocks can be found here.

Now that you’ve come this far, it’s time to move on to Step 4: Adopt a more frugal lifestyle.

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This is part of my ongoing theme “The 8 Step Process to Being Rich“.

I think the importance of a Roth IRA and how I feel about them has been stressed quite a bit here at this site. I wrote “No Reason not to have a Roth IRA” and Joe wrote “More on Roth IRAs: Just Starting Out“. I think I’ve just decided that I can’t talk enough about this tool. It is such a great way to earn capital gains and actually keep your share of it. Sure, you’ll pay taxes before you make your contributions but from then on, everything is all yours! It’s like giving the finger to the man. Well, maybe not, but still it’s one of the few loopholes that the IRS is gonna give you. I think the reason I like them so much is that it makes it hard to pull money from the investment. You put the money in and you can’t touch any of those gains to go out and buy something stupid that you don’t need. Those gains are there for what’s really important; a home or retirement.

So I figure I’ve spoken enough (for today) on why I like a Roth IRA but I haven’t given much input on what to do with an IRA once you’ve got it set up. The best way to get the most out of your IRA is to max it out every year. Every year you can contribute $4,000 to it. I suggest setting up an automatic investment plan. I like having the money automatically withdrawn from my bank account each month. If you take $4,000 and split it up among twelve months, it figures to be about $333.33 per month. Or if you’d prefer, some investment brokers will allow you to have the money withdrawn on a weekly basis. In that case it would figure to about $77 a week.

So once you have your investment schedule set up and you’ve got money pumping in to your IRA, what do you invest in? Well personally, for an IRA, I like index funds. No Load Index funds to be more specific.

Here’s what I like

• The Vangaurd 500 Index (VFINX)
  This fund follows the performance of the S&P 500 index. The S&P 500 tracks 500 large capitalization companies in the U.S.. Over history, the S&P 500 averages gains of about 10% per year. Over the last 5 years, this index has returned at a rate of about 12% to its investors.
• The Vangaurd Total Stock Market Index (VTSMX)
  This is a fund that tracks the performance of the entire stock market. This is another fund that you can probably expect to average about 10% per year over the life of your holding.
• The Vangaurd Small Cap Index (NAESX)
  This fund tracks MSCI US Small Cap 1750 Index. The Small Cap Index is comprised of 1,750 smaller U.S. companies. This is a riskier index fund. By that, I mean that the years this fund is down, it will probably be a lot farther down than the safer investments. On the other hand, the years that this fund is up, you will be seeing much higher returns than the safer funds. This fund, over the last 5 years, has averaged about 17% for its investors.
• The Vangaurd Total International Stock Index (VGTSX)
  This fund follows companies in Europe, The Pacific Region, and emerging markets. Like the last one, it’s a bit higher risk but has returned an average of 20% over the last 5 years.

As you can see, I am a fan of Vangaurd Funds and those are my picks to hold in an IRA account. Obviously you can not purchase all of them and there are some minimum balance requirements. But do some research in to those because I think they are all pretty safe bets over the long haul.

Now go get that IRA started and then move on to Step 3: Setting Up a Discretionary Investment Account.

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This site is called “How I Will Be Rich”. I’ve decided that now might be a good time to kind of explain what I hope to accomplish. I may add more to this later but for now, here are 8 steps that I plan on taking. The point of this post is two-fold. For starters, I am setting goals for myself that I plan to achieve over the course of the next few years. Second, I am explaining to others what steps I plan to take so that others may also give my method a shot.I will give you my list of steps that I will take and then I will elaborate on them in future blog posts and continue to post my progress.Here are my steps:

1. Get a job that you don’t hate.
   I’m pretty much at this point right now. There are days that are stressful and I just want punch a wall and go home and cry. (I never do though… At least not the wall punching thing). That’s pretty much to be said with any job though. I’ve never actually known anyone to say that they absolutely love their job and there is never any stress involved but for the most part, you’ve got to be doing something that does not make you miserable. I’m making descent money and for the most part I’m happy. Consider this goal accomplished…
2. Open a Roth IRA and invest the maximum each year.
   I’ve already explained why there is no reason not to have a Roth IRA and then Joe elaborated on the topic. Max this out every year. Invest in index funds that have been proven to be consistent gainers. If you absolutely need to, you are allowed to pull your contributions out and you can even pull some capital gains out if you are using it for a house, school or an emergency. I just recently set up my Roth but I haven’t quite contributed the max yet for this year… I’m well on my way with this one…
3. Open a discretionary investment account.
   You can only put so much money in to a Roth IRA each year. I love investing and I think it’s a good idea to have a discretionary account in which you can add and pull money from as you please. I like to use this account for trading individual stocks. I wrote an article on my investing technique. Some people might say that it’s trying to time the market but, so far, for me, it’s been a great way to tell when to get in to a stock. From then on out, I tend to hold for a while. I personally have a Scottrade account but I think it’s about to go bye bye. I’m currently looking in to setting up an account at Zecco.com because they offer free trades. Scottrade is too slow and it seems to be sort of difficult to pull my money from the brokerage. Besides, how can you beat $0 trades? I’m well under way with this goal as well.
4. Adopt a more frugal lifestyle.
   Some people get frugal and cheap confused. Ramit over at “I Will Teach You to Be Rich” describes cheap people as people who care about the cost of something while frugal people are people who care about the value of something. Buy what you need and shop smart. I am working on this one.
5. Start a blog and take steps to monetize.
   I guess my ultimate goal with the whole blogging thing is to make enough money with it that it covers one of my monthly bills. It would be so nice if I could some day say that my rent payment was covered by my blog. I still think I’m a little off from that goal though. Does anybody know of a place I can rent for $10 a month?
6. De-clutter my life and sell what might be valuable.
   I read a post over at Get Rich Slowly called “The Frugal Collector: 10 Ways to Curb the Habit“. It really made me think about how much I have and how much I can probably get rid of. When I was younger I used to collect comic books. I have hundreds and hundreds. Some are probably worth something too. I’ve decided that one of these weekends, I’m just going to go through all my collections and see if anything is of any value and try to sell whatever I don’t want. I have comic books, dvds, cds, books, computer software and various little gadgets that I probably haven’t touched in years. I can probably make a little bit of money with these and, if I’m lucky, pay down my truck a little. I’m done with hording things. I’m going to stop buying the things that aren’t necessary and started getting rid of the things I don’t need.
7. Start my own business.
   I have so many ideas for different businesses some of them brick and mortar some of them online. I hope to get at least one of them started within the next couple months. This will most likely be the online business because it requires much less start up capital. I just want to have a job where I can set my own schedule and my wages are only determined by what I can do. Then when I’m ready to retire, I can sell all the businesses I’ve created. If you’ve ever read The E-Myth, Michael Gerber explains that when owning a businesses, always have the mindset that you are building it to sell it. Can’t quite say that I’ve accomplished this goal, but I will…
8. Buy a home.
   Finally, I want to own a home. This is not my first goal though. I want to achieve all my other goals first. I want to make sure that when I purchase a home, I can do it comfortably. I know that when my parents bought their first home they had no idea how they were going to pay for it. I want to have a plan and I want all my debts to be paid off. I want to know that my blog or my online business is covering my mortgage payment every month. Mark this goal as still pretty far in the future…

Those are my steps. I’m constantly reading blogs and new books so I may have to add new steps and new good ideas. But as of now, that is my financial goal set. Feel free to comment.

-M

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