NinjaPigeon - My Flight to Financial Independence

Saturday, March 18, 2006

What I did right

Someone asked me recently if I had any tips I could pass on about how I was able to start meeting my financial goals. I'm not sure I'm terribly great off, all things considered, but maybe I can share some of the things that I've done along the way that ended up being right and in another post I'll share some that ended up being wrong.

1. I paid myself first.
This cannot be said enough times, in enough books. It's probably the simplest and yet most powerful thing I've learned. I often like to joke when people ask me why I still have over 25k of student loans yet continue to beef up my savings that "The citibank executives aren't going to Hawaii off me until I can afford to go myself." By paying myself first I was able to build up a nice emergency fun which has saved me several times in the last couple of years, preventing me from having to tap my credit cards for "help".

2. I started my 401k.
I originally only meant to contribute to the match amount of my employer, but accidentally ended up contributing 10%. I didn't even notice the difference in my check, so several months later I upped my deductions to the max allowed. My 401k hasn't yet hit a year but is already up 10%.

3. I started a Roth IRA.
I'd been hearing about Roths for a while and knew that they were "good" but didn't really understand them. However, I contributed anyway deciding it was better to learn as I go than to stall (my usual practice) and miss out on a year of contributions. Seeing as I am not eligible to contribute this year, and my Roth is up about 8.5%, I'd say it was a strong choice.

4. I worked hard to further my career.
While this may seem like a given to most, it's surpising how many people stay at a job because they are comfortable. My last job was very slack, with only 30-35 hours required, compared to my current job where 40 is the minimum. However, I love what I do, love the people, and am learning a great deal more. The 25% raise was just icing on the cake compared to the satisfaction I get at knowing I'm finally making it as a professional.

5. I kept an open mind.
Everytime I tell someone that I keep my emergency fund with an online bank, that I can't get to my money in under 3-5 business days, and that without Internet access I can't get it at all, they stare at me in horror. The entire idea of an online bank frightens many smart people. Because they are unwilling to research these online banks or to explore the benefits, they miss out on 4% or better on a liquid account in favor of 2% or so on a local account, or worse yet, 3.5% on a 12+ month CD.

6. I learned how credit works.
It's funny to look back and realize how little most of us know about credit. My dad, who is the most obsessive saver I know, does not see the wisdom of having multiple credit cards. When he would pay one off that my mother had run up, he'd close the account. I've learned that credit cards can be powerful, as long as you don't fall into the trap set for you by the credit card companies and your own desire to buy things you can't afford.


  • Are you sure you aren't eligible to contribute to a Roth IRA this year? Why not? You can contribute both to a 401(k) and a Roth IRA. If you are single, you can contribute the full amount if your income is below $95,000.

    By Blogger Shaun, at 3/22/2006 1:17 PM  

  • Yah, that's the problem. This year I'll break the 95k limit. However, Roths work similar to other IRAs in that if you are over the limit, the benefits scale back, rather than just stop. So I can contribute a smaller amount to my Roth unless I break 110k.

    My income right now is a bit higher than usual, but I still don't think I can get enough under the 110k limit to even bother with the Roth for now.

    By Blogger NinjaPigeon, at 3/22/2006 8:32 PM  

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