Pinyo at Moolanomy is giving away books to some lucky people who share their investing story. And since I think the book looks useful, I’ve decided to share mine. It’s slightly embarrassing for me, but I hope it’ll be amusing or educational for you!
I’ll begin the story by reminding reader that I am 22. Specifically 22 and 2.5 months.
Here’s the embarrassing part. If you’re a regular reader, you know that I don’t yet have enough saved for real investing. Or you probably know that. There’s some savings and my emergency fund, but not enough to invest with.
Anyway, I decided to put $1000 in an ING CD (this was before my plan to change jobs and we’d been steadily saving money each month). My goal was to put my savings for investing in CDs and/or money markets so that it could earn decent interest while I accumulated it. The end goal was $3000 which I could put into a Roth IRA at Vanguard and invest in their simplest index fund. Eventually, I’d buy a simple bond fund and then something international and perhaps something socially conscious. All the while adding savings to the various funds on the account.
So that’s my plan. That’s still my plan, but that was my plan.
Back to my story–I put $1000 in an ING account at a decent rate for 12 months. That was around September 10th.
And so I was just doing my thing, relaxing while my money did stuff, all that…
Then a week ago (or so) I got an e-mail from ING. Apparently, I didn’t respond to a letter I got from them so they returned the money to my linked account.
Whoops! *looks sheepish* I could have put it back in the account but decided to keep it because of my recent job change–just in case. I did get 2 months of interest and no fee for the return.
I didn’t feel like sharing this for a while because it’s kind of embarrassing. But it’s my investing story so far. Take it for what it is–a learning process. Oh, and pay attention to the mail your bank sends you. While I open mine, I sometimes have a hard time figuring out what’s relevant and what’s junk.
You still have a little time to enter the contest. So consider sharing your story before the 30th!
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The important thing is that you are still young and you are willing to learn. Right now, just focus on your debt and keep learning as much as you can about investing.
Even if you don’t come up with the full $3000, you might want to contribute whatever you have to a new IRA before April 2008 and let it sit in a money market fund. Otherwise you’ll miss the window for 2007 contributions.
I would like to give a quick word of advice which is rarely discussed on personal finance blogs, because it’s not a common situation, but is (potentially) your situation.
If you have a choice between making a Roth IRA contribution or having an emergency fund, I believe you should make the Roth IRA contribution. Ideally, of course, you should do both. But if you’re in danger of missing the contribution deadline and the only way to contribute is to drain your emergency fund, you should do so. Note: don’t be silly and contribute money which you know you’re going to need, just the excess which would normally be in the emergency fund. The reason why you do this is because the Roth IRA can act as an emergency fund. Contributions (though not earnings) can always be withdrawn without taxes or penalty. The only thing you do lose is the ability to make that Roth IRA contribution (since you can’t redeposit it once it’s withdrawn), but you were going to lose that anyway.
This strategy wins very big if you never need to take out the contributions and are able to rebuild your emergency fund. The only possible risk is that you will need to withdraw the funds for an emergency and the market has gone down since you made the contributions (so you don’t have the full emergency fund). However, this risk isn’t very large (it requires two bad things to happen — the market to go down and an emergency to occur before you’ve restocked) and it’s likely that the money lost will be fairly minor (at most 10-15%), barring a market crash.
Thanks so much, Andrew, really good point! 🙂 I hadn’t even thought of putting those together. 😀
Yay! I shall investigate this!
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