I guess the other big resolution a lot of people focus on is getting a handle of their finances, paying off debt, etc.  I’d like to think I have the money thing under control.

So, getting fit.  Getting in shape.  Losing weight.  Eliminating muffintops.  Whatever you want to call it.  I’d like to think I’m ready to tackle this.

I’ve set some goals.  There’s a weight goal.  I’d like to be closer to 125lbs.  I also want to go to the gym at least twice a week (to start).  I want to be stronger.  I want to be able to jog/run a 5k and finish in the top half of the results (the times I’ve done 5ks have been jog/walks where my time is on one of the last pages).  I want to eliminate the chubbiness around my middle.

Okay, I have a lot of goals.  Maybe too many all at once.  I’ve gotten all excited about getting into shape before, only to burn out and end up wasting having a gym membership (a scandal for the personal finance world and the fitness world alike!  Luckily I don’t have a horribly high membership fee…but still!)

But as you know, there’s one thing I love when it comes to personal finance:  tracking websites.  And the same holds true for my new fitness goals.  Yes, tracking has failed before, but I think I’m gaining motivation and momentum by having accounts at so many places

I joined LoseIt.com after a few people told me how much it was helping them lose weight and control what they eat.  They also have apps for iPhone/iPad/iPod touch as well as Android (and apparently on other gadgets like the Nook and through the Amazon App Store), if that’s more your thing.  I don’t have a smartphone, so I’ve stuck with the website.  What I like about this site is that it gives you a calorie budget, and you can track your food and exercise, and it has a pretty comprehensive database of calorie content (for food) and calories burned (for exercise).  It even has Wii Fit exercises!  You can add friends on the site and for mutual support.  And you know how much I like sites where you can earn badges (like Payoff.com), and this site awards you badges for accomplishments, like sticking with the site for even a few days  (little stuff to keep you motivated), to losing 10lbs, to working out multiple times a week.

What else am I using?  Well, work is again sponsoring a website that encourages you to get in shape.  I’ve formed a team with my coworkers, and we’re going to be competing in the weight loss, exercise, and pedometer steps categories.  We’ll be tracking our progress in those categories.  I like having a team with my coworkers, since we’ll be supporting (and nagging) each other to eat healthier and get some extra exercise.

The rest of my websites are connected to my iPod Nano.  One of the cool features of the latest generation Nano is that it has a Nike+ sensor/pedometer built in (no shoe widget required).  So I’ve been able to track my runs and steps (recorded as Nike Fuel) through their online sites.

I’ve used MapMyRun on and off for a few years.  So one thing I’m excited about getting back to using it is that it will sync with my Nike+ runs and record them automatically.  So that makes things easy

And lastly, I joined Earndit, a site that syncs with many of the tracking services (like Nike+, Fitbit, and others) and allows you to earn points, which you can spend on rewards.  I like earning points and rewards!  They also have challenges sponsored by fitness-related companies from time to time with prizes available to the best scorers.  And even if you don’t have any of the supported devices, if you have a smart phone, you can earn points by checking in on Foursquare when you go to the gym!

So, yes.  I’m using a lot of different websites.  That’s how I roll.  But other than using a million websites (and posting inspirational images/informative posts on Pinterest), I am committing myself to the habits that will get me towards my goals.  Watching what I eat, replacing unhealthy food with healthy food, going to the gym for cardio, weights, or yoga a few times a week.  Walking to nearby places instead of driving.  The little things that can get me to where I want to be.

I’ve also made goals to reward myself for good behavior.  Like buying myself a FitBit Ultra after my Nike+ running log says I’ve gone 50 miles this year.  I’m not there yet, but I’ve heard really good things about the FitBit from others (like Elizabeth and Kristen), and it also works with the websites I mentioned above.  Basically I like data.  So the more data, the better.

So, what do you use for motivation or tracking your weight loss/exercise/fitness?  Are you members on any of the sites I mentioned (want to be friends with me on there)?  Do you think I can actually get in shape this time?  Or am I starting out too intense and will just end up lying on the couch eating ice cream?  The past few weeks have gone relatively well.  Only time will tell.  I’d love to hear about your fitness techniques!  Please share your advice!

(FYI, I’m linking to all these sites merely as recommendations.  I am not being compensated in any way for mentioning them.  Though if they’d like to give me some free stuff, I’ll take it  and then of course I’d update this disclaimer)

On January 5, I got an email from Suze Orman. I don’t remember when I signed up to get emails from her, but that’s not the point. She alerted me (and all her other email subscribers) to her People First Movement, set to kick off on January 9th. Well, I can’t say I marked my calendar, but I was curious about what “new financial product” she was excited to tell us about.  I figured she was referring to another financial tracking website.  You know how much I love those

January 9th rolls around, and my inbox is blessed with another note from Suze.  She was offering a new pre-paid debit card.  I remember reading that email, and I’m pretty sure I said something to the effect of “HELL NO!” before closing the entire web browser in anger and disgust.

But seriously, I was kind of taken aback.  Suze Orman’s offering a pre-paid debit card.  On the one hand, I think it’s good that she’s making a pre-paid card that, on the surface, seems to have fewer fees than other pre-paid cards, assuming you know exactly how to get around most of them (http://theapprovedcard.com/fees/ for reference), but I still haven’t accepted the basic premise that some individuals can’t get even the simplest bank account, and must resort to using a pre-paid debit card.  I might be out of touch, but shouldn’t a credit union or bank be willing to offer a no-frills bank account?

Then there are the three ways to re-load the card: direct deposit, transferring from another account, or paying Western Union or MoneyGram $3.50 to add cash to the card.  All three of those seem like perfect reasons to NOT get the pre-paid debit card:  If you get direct deposit (from a paycheck), you can probably get a bank account.  That’s usually what banks like to see when opening accounts.  If you have another bank account, couldn’t you use that instead of a pre-paid, fee-laden card? And if you’re using cash, why pay $3.50 to load the cash then a $3 fee per month to use it? (except perhaps if you wanted to keep your cash safe in the non-bank account).

Ron Lieber posted a follow-up about the card, having asked readers for possible good reasons to get the card.  The three he lists here include: being unwilling or unable to get a bank account (for any number of reasons), as a budgeting tool to limit your spending to a set amount, or as a pseudo-checking account for kids.  I guess the other option is if you need to do online transactions or rent a car/book a hotel/flight etc., you’d need either a credit or debit card for payment.

The whole FICO score aspect of this is confusing, too.  It’s unclear (at least to me).  It sounds like she’s offering a free year of credit monitoring/scores/etc. from TransUnion.  Which is basically what you get from CreditKarma, but without having to use her pre-paid card.  Then there’s The Credit Project, where you can volunteer to have your transaction data sent to TransUnion, so they can decide if they maybe in the future want to include pre-paid debit cards in credit scores/reports.  I don’t have much faith that a credit agency is going to change any time soon.

Anyway, that’s a long enough rant. I just am always wary of these pre-paid cards, they seem to take advantage of people who already have trouble with money.  And it seems like Suze Orman is abusing her power as a “personal finance expert” in getting people to sign onto something that may not be in their best interest.  I know a lot of other people have posted their (negative) reviews of the Approved Card.  Let me know if you wrote one, and I’ll link to it!

I want to just finish this by saying that, usually, I’m okay with Suze Orman.  One of the books I read when I was first figuring out this whole personal finance thing was her book Young, Fabulous, and Broke.  And I enjoyed her keynote speech at the Massachusetts Conference for Women in 2009.  I just think that this is a bad move on her part, using her fans’ trust for financial gain.

A year ago today, I posted some numbers.  The changes in my finances in 2010.  So it’s time to see how I did in 2011!

How much did my assets and debts change this past year?  Check it out:

Assets:

• Liquid assets (checking and savings accounts):
  +$15,101 (would have been ~$4k higher…see student loans below)

• Retirement (401(k), Roth IRA, Rollover IRA):
  +$12,235 (the stock market is still a little crummy.  But I did increase my 401(k) contributions to 7% as of the end of November)

• Car (edmunds.com private sale value):
  -$626 (I know there’s a lot of debate over including cars in net worth calculations.  I initially included it to make myself feel better about my auto loan, to balance out the ugly dip in my net worth)

Debts:

• Student Loans:
  Reduced  payoff balance by $11,142 (it definitely helped to throw $4k at one of them!)

• Car Loan:
  Still $0!  It felt so awesome paying off my car loan 3 years early.

Change in net worth since last year:  +$37,386

Not as high as last year’s change of +$43,140.  But I’m still pretty impressed.

Let’s review this year!

I read a bunch of personal finance books, including Generation Earn by Kimberly Palmer and Get A Financial Life by Beth Kobliner  I did read the Personal Finance Book Club book, Shortchanged: Why Women Have Less Wealth and What Can Be Done About It by Mariko Chang, but never got around to reviewing it.  You can check out reviews from Savvy Working Gal and Little Miss Moneybags.  I am also halfway through John C. Bogle’s The Little Book of Common Sense Investing.  Spoiler alert of anything you’ll read by Bogle:  Buy low cost index funds and hold them forever.

We moved!  We used to live in a 4 bedroom apartment with roommates.  Now we live in a smaller apartment, just the two of us!  It costs a bit more to live in the new place, but it was time for a change, and we love our new apartment!

I’ve checked out a few personal finance websites.  Though I’ve tried more, I only reviewed Payoff.com and Credit Karma.  I’m a fan of both!

I tried again to get Take Control of Your Finances Day up and running.  Hope to get even more support this year to help spread it!

I started a blogging series:  My Friends are Buying Houses.  So far I just have 2 posts, but I welcome more!  Let me know if you’re interested in posting about your homebuying experience (or why you’re not buying a house yet!)

I guess there were a lot of other things that happened on my blog (and in my life) this year. You know, like paying $4k towards a student loan.  But you’ve heard about that a few times now

Reading last year’s post is funny because I realize not much has changed when it comes to my personal finance tendencies.  I’m still wishy washy about my decisions (personal finance or otherwise).  And still paying down my loans with occasional lump sums in addition to the monthly payments.  I also thought it was funny that I debated doing a $4k lump sum payment.  Which I ended up doing!  I didn’t even remember that part of the post!

So looking ahead.  Should I make the same goal I made last year?  Take the gains in my liquid assets and apply them towards my loans?  $15k would eliminate a few of my loans!  Hmmm.

I don’t have any big plans for this year (as of yet).  Maybe we’ll finally go on a big vacation (we’ve been talking about taking one for years).  That would cut into the liquid assets a bit.  But we haven’t gone on a big trip since Nicaragua in 2007 (unless you count all the weddings we’ve gone to).  We’ll see.  For now, I’m just going to relax for the last few days of my vacation, and meditate on my future goals.  I’ll try to make (and actually meet) some resolutions/goals soon!

Happy New Year!

How was your 2011?  What were your main successes?  What are your top resolutions for 2012?

My final decision:  Pay $4,000 towards a loan currently at 3.5% interest.

I still have $4,584.34 to pay off on that 3.5% interest loan, and $30,330.61 total on a group of loans at 2.75%.

I headed over to the What’s The Cost’s snowball calculator to see how long it would take me to pay off these loans.  If I keep paying the minimum that is auto-paid every month, I’ll finally be free of these student loans by March 2018 (assuming that when I finish paying off the 3.5% loan, I’d use that money to pay down the remainder of the 2.75% loans). That is WAY too long.  I don’t want to wait that long.  That’s a lot of extra interest accruing.  And with interest rates on savings accounts now below 1% for pretty much every account I know of, it would make more sense to pay down the loans more quickly. So, I went back in to the snowball calculator, and tried to figure out how much I’d have to pay if I wanted to be rid of the debt by the end of 2012 (a wild goal I considered making after I felt so good paying the $4k).  Turns out I’d have to pay around $3k PER MONTH to get rid of all my debt within the year.

Here’s the thing:  I have a lot of money in savings.  Possibly too much, considering other things I could have done, like pay down my loans more quickly, or put more in my 401(k).  I’m basically like the people on Hoarders, but with money.  I’ve got a solid emergency fund, plus I’m saving up for a down payment and maybe eventually a wedding.  But those are still a long way ahead of me.

So the question is:  should I use my savings to pay off my loans?  In the long run, networth-wise, I should just get rid of my debt.  Granted, I was more keen on getting rid of it back when I graduated, with it being at 8.5% on $70k or so.  Most people would be willing to do almost anything for a 3.5% interest rate on a loan.  Part of me really just wants to get rid of that debt.  And if I draw from my savings, I think I can do it. But I should keep an emergency fund.  You know, for emergencies.

I think my best bet is to just set an amount that I will pay every month beyond the minimum.  I’m thinking $500-$1000 extra per month.  I think it can be done.

For now, I’m really glad that I made a big dent in my loans.  And that meant I met my first goal that I set on Payoff.com (and earned the First Goal Complete badge!).  And I earned 4000 credits on SaveUp.  So, besides lowering my debts, I got a few virtual rewards

So, would you pull money out of savings to pay low-interest debts?  Is there an amount or an interest rate that would make you change your mind?

Again, it’s the Lexus ads driving me nuts.  This year, all the gift giving occasions revolve around recognizing the somehow universally known “Lexus song”.  You know, because when you hear that song, you know your significant other dropped a minimum of $34k to surprise you.  Was it on your Amazon wish list or something?

I did a little research, and it turns out that “Lexus Song” is actually called “Family & Friends“, written by Steve Kujala, a prolific composer and flautist.  I actually listened to the whole piece.  Luckily, listening to the actual piece doesn’t fill me with infinite range.

So, back to the commercials.  The couples are together, and then they hear the song, played by some clever means, like in a music box, as a ringtone, or the Muzak playing in the elevator.  I will admit, as a video game fan, I was least annoyed by the one where they programmed the song in Guitar Hero.  But still.  You don’t buy cars for people.

Unless, of course, you’re a millionaire:

Like last year, I was able to make an exception for commercials that amuse me and make fun of other ads.

So, what commercials are making you angry this holiday season?

Tuesday Nov 22:  I gave in and got soup at the work cafeteria.  $2.55

Wednesday Nov 23:  Driving home to NJ for Thanksgiving.  Some traffic made me decide to take a detour and look for a pit stop.  Found a random tiny diner to use the facilities, then felt bad for just using their place for the bathroom, so I bought a $2.25 burger.  Not worth the cost, but oh well.  Was on the road for quite a few more hours (boo traffic) so I guess it was good that I ate something.  Also, tolls (tallied up on my Fast Lane) for that trip:  $9.90

Thursday Nov 24:  Thanksgiving!  The only thing I spent was time with my family

Friday Nov 25:  My mom gave me an early Christmas gift:  a visit to her local hair salon so I could get highlights to blend away the gray hairs!  The hairdresser was pretty surprised at how much gray hair I had.  But I think she did a good job camouflaging it!  So, that was “free” as a kind gift from my mom.  I think she knew I wouldn’t do it otherwise!

The family tradition is going to a local shop run by a high school friend’s aunt.  That’s the only place we went, so we avoided the insane Black Friday shoppers.

Later that night, I drove with my younger sister to my older sister’s house to hang out with her and her husband.  On the way back to my parents’ house, noticed my gas tank was getting low.  Fuel up costs:  $33.86

Saturday Nov 26:  The thing about coming home is that we get a little spoiled.  Fun things included:  Going to the movies! We saw Arthur Christmas.  It was super cute, and really funny!  The kind of movie that I probably could only have seen with my family

Afterwards, we went to a local Mexican restaurant that we love.

My parents were awesome enough to pay for the movie and dinner.  Hooray them!  Thanks

Sunday Nov 27:  Didn’t want to leave!  Love being with my family.  Stopped partway home to grab a coffee and a small fries from McDonald’s to keep me awake and keep my stomach from growling.  $2.12.  Total cost of tolls for drive back to Boston:  $14.30 (I took the Tappan Zee Bridge both directions, they only charge going South/East)

Monday Nov 28:  Brought my lunch.  But I got tempted by all the Cyber Monday sales.

I had won a gift certificate from Cuddl Duds by entering their “Quote of the Day” contest.  (You can still submit your quotes for a chance to win!), and I also knew they were having a Cyber Monday sale of 30% off…I figured it was my best chance to get a good deal!  I went for the top and the leggings from the Activewear Lightweight clothing.  After discount and gift certificate, $9.80

Then, I was on the Kohl’s website, and realized that there was a slightly different selection of Cuddl Duds for sale.  There was some overlap between sites.  So, that made me decide I’d get the Activewear stuff directly from Cuddl Duds, but then I caved seeing the insane sales plus extra 20% off (making most other options cheaper than buying direct) plus free shipping, so I went for the ActiveLayer Top, then the Climatesmart Top and Pants.  I went a little nuts.  My logic was, hey, it’s cheaper on the Kohl’s website, but I have the gift certificate on the Cuddl Duds website, and only some things are available on each site….

My brain went crazy.  At least I got some good deals.  And if I regret these decisions, I can always return it (though, who am I kidding, I probably wont).  Total expense on Kohls.com:  $47.98

Oops.  Why did I buy all this?  My reasoning is that they’re good for outdoor activities, so between skiing, winter walks, and shoveling, I’ll get good use out of them.

Tuesday Nov 29:  Brought my lunch.  But then realized I needed shampoo/conditioner for my now color-treated hair.  Not sure how much it matters, but I wanted to make sure my highlights lasted!  And while I was at CVS I saw a coupon for $1.50 off any deodorant, so I picked up a new one while there.  I guess I cheaped out on the hair care, because I only spent $5.81 at the store.

Wednesday, Nov 30:  Last day.  I brought lunch.  But because of all the driving I did this month (i.e. a round trip between Boston and central New Jersey) I had to fill up the gas tank again.  $33.99.

This final “week”:  $162.56.

What a month!  I didn’t do as well as I hoped.  I caved a few times when it came to dining out or buying lunches.  And I spent more on gas than usual due to the extra driving.  Expenses I didn’t include throughout was rent, utilities, transfers to savings/retirement accounts, student loan payments, and my gym.  Why?  Well, most of those transactions are automatic, so they just happen on the days they’re scheduled for.  Yeah, my gym membership is charged every month.  $27/month.

So, total amount of money I consciously spent this month?  $438.05.  Not exactly no-spend, eh?  Some of these expenses were unavoidable (I need gas to drive to work!), some were splurges (going out to dinner, buying myself a new wardrobe of Cuddl Duds).  I’m planning on continuing to bring lunch to work as much as possible (though tomorrow we’re going out for a colleague’s retirement party…but Friday, I promise I’ll bring lunch!).  I know next month will be expensive, with more retirement parties, holiday parties, and Christmas gifts.  I haven’t started shopping for gifts yet, and I’ll try to not be too extravagant, but I do tend to spend a lot on other people for Christmas.  We’ll have to wait and see what happens.

So what do you think of my no-spend November?  Impressed at how little I spent?  Disappointed at how much I spent?  Or was that the exact amount you predicted I’d spend?

My first response was:  No Way.  I’m not paying some people to do something I could do for free!

But then I read the paperwork they sent me.  Apparently I have two options available to me.  I can use their site for free to continue to manage my 401(k) on my own.  Or I can pay a fee to have them plan out, monitor, and rebalance my portfolio. Of course, the paperwork tries to point out how much better things would be if I did pay them for help.  They included stats/graphs showing that if you get their help, you’re likely to improve your return over the long run.

So, will I sign up?  Turns out they’re offering a few free months to hook you onto the “paid” plan.  The fees actually aren’t horrible, and it’ll be nice to actually talk to someone about my fund selection.  Plus, I can import my other retirement accounts (like my Roth IRA and rollover IRA).  I’ve tried out their free program, and it has some decent advice (like how to reallocate my funds to have a slightly more aggressive portfolio) and what other funds I could invest in within my IRAs.  It also told me to increase my contributions from 5% to 7%.  So, I actually already changed the contribution amount.  It was an easy change that made sense.

As for the fund recommendations, they aren’t quite right.  For example, one of the funds they suggested I invest my Roth IRA in has a $1million minimum investment.  Um, no.  But it’s putting me on the right track, I guess.  I could look for similar funds that don’t have outrageous minimums or high fees.

I think I’ll try out the paid program, get my portfolio in order, then switch to the free advice system.  It sounds like Krystal is also thinking about briefly trying a financial advisor, then continuing to manage her portfolio herself.

So, like Krystal asked, would you pay for someone to manage your portfolio?  Would you pay for just advice?  I’ll admit, while I think I’ve got personal finance stuff covered, I’m not very confident about my investing skills.  So, trying this out to start, but then trying to learn more along the way (and shifting back to the free plan after the trial period is over) is the best way for me to approach this.

Tuesday Nov 15:  Was sick of bringing in sandwiches and leftovers.  Call it no-spend burnout.  Bought the taco salad at lunch.  $5.87  Good news is that kept me pretty full all day, I think I didn’t even need dinner!

Wednesday Nov 16:  Back to the sandwiches.  No Spend.

Thursday Nov 17:  We had a section meeting, so we got lunch coupons for the cafeteria.  Used it to buy two large bowls of chili and a granola bar.  No spend (of my money!)

Friday Nov 18:  Ate the second bowl of chili for lunch.  I’m a chili fiend! Dinner time, boyfriend and I wanted to go out to eat.  So we did.  Got some Thai food at a local restaurant.  A few appetizers and entrees (and a little leftover to eat the next day) + tax + tip:  $40.

Saturday Nov 19:  Didn’t do much of anything, just relaxed all day.  Staying home means no-spend.

Sunday Nov 20:   Met up with some old friends in Cambridge.  Ate at Abigails.  $14  Wasn’t very impressed with the service, or the prices for that matter.  But I was willing to go since I hadn’t seen these friends in awhile.

At church, put $1 in the collection plate.  I’m a cheapskate.

My car’s gas tank was running on empty, so I had to fill up.  Luckily, I had enough gas to get to the cheap station near home.  $37.

Monday Nov 21:  Brought salad for lunch, but was craving something warm.  So I bought a cup of soup in the cafeteria to supplement my meal.  $2.55.

As you can tell, I’m not doing so great at this no-spend thing.  Total this week was $100.42.  My mom’s been following along, and was worried that I was starving myself or being ridiculous with my lack of spending.  But I assured her, I’ve just been cutting down on bought lunches, really.  And avoiding going anywhere near Target or the mall…

Looking ahead, the expenses will definitely be another tank or two of gas, a few more lunches if I can’t get my lunch-packing act together.  The only shopping I’ll be doing this weekend will be at local shops, trying to go with the Shift Your Shopping movement.  And I wont be shopping anywhere that opens before 10AM on Friday

I’m very much looking forward to this Thanksgiving break.  Family and Food?  Two of my favorite things!

Will this weekend be no-spend for you?  Or will you be spending up a storm at all the Black Friday sales?

Tuesday Nov 8:  Went to a 401(k) presentation sponsored by the young-employee network at work during lunch…and lunch was provided!  I think I already knew most of the stuff they talked about, but it’s always good to get a refresher on retirement investments!

Wednesday Nov 9:  Brought my lunch.  But then on the way home from the gym that night I filled up my car tires (for free) but didn’t have a tire gauge to confirm my tires weren’t overfilled (which I did discover they were, had to let them out quite a bit), so I bought a tire gauge and some valve caps to replace ones that had fallen off.  $4.55

Thursday Nov 10:  Stayed home sick again, so I didn’t need to pack or buy a lunch.  No spend!

Friday Nov 11:  Brought my lunch.  Went out with some friends from work for drinks/dinner.  Beer, burger, fries (plus tax and tip):  $15.55

Saturday Nov 12:  Wanted to use up the $20 in Kohls cash that was expiring.  Bought these shoes (in brown).  With the sale, the Kohls cash, and a coupon, I paid an extra $3.79.  (and when I got home, I put TWO pairs of old shoes in the donate pile!)  Then went to the grocery store so I could buy yogurt for the banana bread recipe I wanted to make.  Saw English Muffins buy 1 get 2 free, so I let the deal seeker part of me win out. $6.58

Went out for dinner at Tu Y Yo (SO DELICIOUS!) with another couple.  Boyfriend paid for our half of the meal (it was his turn to pay, we trade off who pays).

Sun Nov 13:  Went to church.  Intended to put some money in the collection plate, but I didn’t have any cash on me, so I gave a measly 60 cents.

Mon Nov 14:  Brought leftovers to work.  So, no-spend!

So, this past week, I spent a total of $31.07.  (check my math?)  Not too bad.  I’m realizing that this No Spend plan is really more of me training myself to bring my lunch and think twice about purchases.

Roth IRAs are the Big Thing these days for younger people looking to save for retirement.   We’re all encouraged to open one, and contribute to it.  Seems like it doesn’t matter what fund you buy.  Your mission (from the personal finance gurus) is to put money in there.  Put all $5k in there if you can.  If you’re doing that and contributing to a 401(k) up to at least any employer match, you are on the right track (according to gurus, and to be honest, according to me, too!)

My younger sister is currently in grad school.  She sent me a message the other day, with the basic question:  Should I open a Roth IRA?  What are your thoughts on this?

My response?  A combination of advice and general information.  Read on:

They’re a good idea.  It’s good to start saving for your retirement now.  Plus with the stock market down, you buy funds “on sale”

I maybe sound like a salesperson.  Ooops.

You can contribute up to $5000, or your income (what shows up on your W-2s), whichever is lower.  But I’m assuming your stipend is more than $5000!

Also, not sure what your stipend is, but if you make less than $27,750, you can get up to $1000 tax credit if you contribute to a retirement fund

The benefit of contributing to a Roth IRA right now is, of course, “The Power of Compounding”.  There’s a common example that if you contribute now and for only a few years, you’ll have more money than if you start later and contribute longer.  Magic.  Assuming the markets go up!

With a Roth IRA, you’re paying in money that was already taxed (through your employer), so when you contribute to your Roth, it can now grow tax-free (and be withdrawn tax-free when you retire).  And since your income level isn’t super high right now, your tax rate is relatively low.  Presumably, in the future, your tax rate will be higher, so if you had used a traditional IRA, while you don’t pay tax now (or you get a tax refund now, depending on how you do the IRA), you’d have to pay taxes on the money you take out of the account (when you retire).  So taxes might be higher then.  It’s a bit of a hedge, because it’s hard to know for certain what rates will be.

Lastly, if you’re mildly freaked out by the idea of putting a lot of money into an account, don’t worry.  Two parts make it less scary:  1.  You are able to withdraw your CONTRIBUTIONS at any time without penalty.  So, you can take out that money.  2.  You don’t have to put the whole $5000 (or however much you decide to contribute) all at once.  I contribute 1/12th of the total amount every month, and buy into a fund every month.  The idea of “dollar cost averaging” will work in your favor, here.  The basic idea is that you buy some of the fund every month, and you buy more when it’s “cheaper” (when the stock price is down), and less when it’s more expensive.  That way you don’t have to worry so much about putting all your eggs in one basket and trying to time the market perfectly.  Because that’s basically impossible.

As for what fund to invest in, most companies offer a fund geared at your particular retirement year.  So you can just contribute to the 2055 fund or something like that, and it’ll start out being more aggressive, then transition to being more conservative as you get older.  Another good option (often with much lower fees) is an index fund.  You’ll want to put your money in a fund with a low expense ratio (read:  cost) so that more of your investment goes to you and less to fees.  Usually it’s hard to buy certain other funds or individual stocks/bonds when you’re just starting out, because you need to have a pretty large minimum amount.  So you can build up your retirement fund until you have enough money to diversify, or you can just keep it in the lifecycle fund that fits your age or an index fund.

So.  If you want to start saving for your retirement (and you should!) I think Roth IRAs are a really good way to start, and it’s good to start now when you make less money (you can’t contribute if your AGI is over $107k…you know, SOMEDAY you might make that much!) and while you’re in a relatively low tax bracket.  It’s hard to know where the markets or tax rates will go, but I’ve found my Roth IRA to be a great balance to my employer’s 401k plan.

(Reminder, I’m not a financial advisor…I’m just a girl who likes talking about money!  But if you have any questions, I’ll answer them!)

Do you have a Roth IRA?  Traditional IRA?  Do you max out your contributions every year?