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Men of Dadliness,
Hope you all are having a great week and getting after it. I know I am. After a hard week of working both night and day shifts in the emergency room, I’m ready for a respite this weekend in Los Angeles! Before I take off, I just wanted to share with you some investment/financial tools I personally use.
**I AM NOT A FINANCIAL ADVISER AND NOT LICENSED IN ANY AREA OF FINANCE**
This post was spurred by my disbelief in the saving habits of young adults. During a lull in the action in the ED, I was checking one of my investment portfolios and a young medic inquired about what I was doing. After explaining, this medic confessed that he didn’t know what a retirement account even was. His understanding of saving money was simply placing his cash in a savings account whenever he had a surplus. I was floored.
But you don’t need a financial adviser, or a thorough understanding of investment opportunities to be highly motivated to invest your money. I would venture to say it would behoove you to know some very basic core tenets to understand a good deal about investing. This is particularly important in regards to passing basic knowledge to your children. Finance isn’t something that is hammered in school, if at all. The fact of the matter is, Americans are piss-poor and horrible at saving money. A good percentage of the American workforce is timidly skating on the thin ice over a lake of financial disaster.
About 21% of the American population do not save any of their hard-earned income, and around 20% only save 5% of their overall paycheck. Only 15% of people save and/or invest more than 15% of their monetary income. Holy fuck. In 2018, 40% of adults hands down, could not cover a 400 dollar emergency expense if their life depended on it. …i guess you can always just “pray” that your $3000 transmission doesn’t blow on your way to work.
I’m not a money guru by any means, but have been asked several times by my colleagues to share how I save my money. Aside from having a robust emergency savings account and pure gold, this is what I use:
High Yield Savings Account
Have a good grip of cash that you don’t know what to do with? Want to start saving some money and get some actual gains on it unlike a traditional savings account? This is where a high yield savings account can help.
In my personal situation, we sold a house and had a lump sum of money that we didn’t know what to do with. Rather than place it in a traditional savings account with very low interest rates, we looked for other options. The high yield savings account from American Express seemed to be a great stop-gap for us. Offering a 2.10% interest rate, the money we’ve invested has met or surpassed the national annual inflation rate. This means the spending power has and will be preserved when we want to pull it out and use it. With traditional savings accounts that offer interest rates between 0.05% and 1.5%, you loose valuable spending power over time due to consistent inflation rates and the devaluation of money!
Roth Individual Retirement Account (IRA)
Their are traditional IRAs and Roth IRAs. Roth IRAs are great savings vehicles that allow you to basically “cheat” taxes. I don’t mean completely avoid paying taxes, but it allows you to mitigate them to some extent.
My wife and I contribute to a Roth IRA every month as a long-term savings vehicle. With a Roth account, the money you place into it is taxed immediately. You might be thinking, “Wait. I thought you said it cheated taxes?!” …let me finish.
We started this account young, and like most Americans, foresee making greater incomes in the future. When you’re young and in a lesser federal income tax bracket, you pay less in taxes for investment accounts compared to someone like Jeff Bezos (he probably pays more in taxes than I will ever make!). Bottom line up font, when you contribute to a Roth, your contributions are taxed at your current federal income rate at that exact moment. This is fucking awesome when we’re making greater incomes and want to cash out the Roth at retirement age. Because we payed smaller taxes upfront with less income, we wont have to pay higher taxes when we withdraw our Roth due to increased income.
If you foresee yourself making more money in the future, pay your taxes now with a Roth. If you see yourself making less money in the future, go traditional and pay less taxes when your overall income decreases (not the case with most individuals).
Playing With Commission-Free Stock Trading
I’ve managed to tie in my hobby for saving money and a legitimate way to invest and grow funds. I’d always wanted to “play” the stock market, but never knew how to get into it. Thankfully due to technology, I threw some money into the Robinhood app and started learning about stocks!
First off, I don’t recommend this if you do not have extra funds or can’t accept a fluctuating amount of risk. There are no financial advisers that help you with your investment strategy, no one looking over your shoulder to mitigate risk. It’s you, your money, and the entire stock market at your fingertips. Its actually pretty thrilling.
Our strategy involves buying shares of companies we love and/or use everyday. If your a Starbucks addict, buy some Starbucks stock; if you drive a beat-up Subaru Forester and can’t live without your Yeti cooler, Yeti might be the right company for you. This strategy has been successful for us and yielded substantial gains since starting.
What Investment Vehicles Do You Use?
These are just a few ways my wife and I grow our money and keep it safe from extraneous taxes. They are in no way the “best” options; just things that work for us. What are your methods? Getting familiar with the world of finance is crucial and a necessary skill we need to instill in our children. Thanks everyone!
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