Tag Archives: investment

Preparing for the End

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I need to write a will.

Over the last few weeks since my father passed away, I’ve learned an awful lot about how money issues continue on after a person’s life ends.  I’m grateful that my dad had everything in order. He and my mom had wills drawn up several years ago.  They also had Power of Attorney paperwork done and signed and distributed to me and my siblings. My mom was already a joint holder on all of their financial accounts.  He even showed me where he had all of the income tax documents stashed so I would be able to file the taxes for him if he wasn’t able (which turned out to be the case).  My dad was an excellent record keeper (though the fact that he did that with paper ledgers rather than spreadsheets makes my head hurt).

But it turns out there is an awful lot of paperwork involved with the end of life. Changing joint accounts to single accounts.  Changing names on car titles. Filing for life insurance.  Updating information with Social Security. Updating information with my dad’s pension and health insurance.  Canceling magazine subscriptions.  And this is all long after dealing with the actual funeral arrangements.  Every time I turn around I’m learning about something else that needs to be done.  And my dad had everything in order.  This is about as easy as it gets. And it’s not easy.

My dad handled all of the financial stuff and every major decision.  My mom never did any of that for herself.  For the last 68 years.  But everything was left in order, so my brother and I were able to step in and figure everything out pretty easily.  I don’t have everything so in order for myself.  I handle all of the financial stuff and my husband is the one left largely in the dark.  If I had suddenly passed away before filing the income tax, my husband wouldn’t have had any idea where to find the things needed to do so.  He wouldn’t know how to log into our bank accounts or credit card accounts.  He wouldn’t know how to find anything.  My father’s passing was a financial wake-up call for me.  I need to get things in order and make sure my husband knows where to find everything.

I need to write a will.  I need to make sure my husband has my power of attorney if he should need it.  I need to get myself organized.  Nobody expects that they will suddenly pass away.  My dad’s death came after a long illness, so we all saw it coming.  But if we hadn’t, he had things ready.  I need to get things ready.  I need to write a will.

 

 

Investing in Yourself

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The stock market is all over the news lately as it continues its roller coaster ride through 2022.  It almost makes a person think twice about investing.  Luckily there is more than one way to invest.  The Cambridge Dictionary defines investment as “the act of putting money, effort, time, etc. into something to make a profit or get an advantage.”  That can mean sinking money into stocks and bonds.  But it can also mean a number of other things.

Last week I took a vacation.  I spent a week camping my way up and down the Appalachian Mountains, with a three night stop in Tennessee to listen to bluegrass music.  For me that was an investment in myself.  When I left home I was burned out and emotionally exhausted.  When I returned to work I was refreshed and rejuvenated.  Putting that time and money into some time away yielded me the advantage of restoring my mind to a better place, which ultimately makes me better at my job and many other things in my life.

Most of my readers are full-time law students.  Pursuing a degree is definitely an investment in yourself.  Earning a law degree requires an investment of three years of your life as well as a good deal of money.  It’s not a small investment.  But the idea behind investing is that what you get in return is of greater value than what you put in.  In exchange for three years, a bunch of money, and no small amount of stress, the return is a degree which can provide you with a rewarding and often lucrative career.

Another way to invest in yourself is to take good care of your physical health.  Get some exercise.  Eat some vegetables.  Go to the doctor on occasion.  Brush your teeth.  All of these things require some effort.  But the yield is a body better equipped to last you for a very long time.  I admit that I struggle with this one (the exercise part specifically), but I know this is something that will be worthwhile and a good investment for the long run.

Ongoing education is another way to invest in yourself.  This can take many forms.  Learning a new language.  Going to hear a speaker.  Attending a conference.  Using YouTube to learn a new MS Excel trick. Using YouTube to learn how to do a home repair.  Pursuing another degree later in life.  Doing continuing education to maintain a certification.  Reading a book that will teach you a useful skill.  Watching a documentary on PBS.  The important thing is to never stop learning.  Invest in yourself by investing in your brain.

The stock market is indeed scary right now.  But it’s never the wrong time to invest in yourself.  You are a thing of value.  If you add more time and effort to that, you become a thing of even greater value.  Every investment is a risk.  But an investment in yourself is always worthwhile.

 

Retirement: Invest Early and Often

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I’ve had my mind on retirement planning lately.  Ok….really I just went to an RV show, but a few years living full-time in an RV is part of my retirement dream.  So it sort of counts.  But I did actually have a conversation last week with a young Penn State Law alumna who is starting her first full-time job post-graduation.  She asked me about whether she should start putting money in her 401(k) right away, or if she should work on paying down other debts first.  This question is one that a lot of people grapple with when they are first starting out.  And my advice is always the same:  as soon as you are eligible, contribute to your retirement plan at least as much as is required to receive any employer match.  My father gave me this advice when I started my first job, and I have never regretted following it.

One advantage of starting as soon as possible is that the money starts coming out of your paycheck before you get used to getting paid.  It’s impossible to miss money that you’ve never received.  The money comes out of your salary pre-tax, so it’s not as big a hit to your bottom line as you might think.  It’s just one more thing that disappears before you see it—income tax withholding, Social Security withholding, health insurance payments, retirement contributions—it’s all money that you’ve earned but you never receive.  So you don’t count on it and you don’t really think about it, because the process for you is passive.

It is important, however, to contribute enough to get any employer match.  Usually it is something like you contributing 7% of your income and your employer pitches in another 5%.  The percentages will vary, but the concept is the same.  If you give enough, your employer gives you more.  They actually pay you to participate in the retirement plan.  Just for investing in your own retirement.  If you don’t contribute enough to get the match, you are literally throwing away free money that you could have received.

But the most important reason to contribute early and consistently is the power of compounding interest.  The earlier you start saving for retirement, the longer your investments have to grow.  As an example of this, when I was in grad school in 1991 to 1993 (yep….I’m old) I had $150 per semester withheld from my assistantship funds and it went to the Ohio State Employees Retirement System.  I remember being really mad about it at the time.  Those were lean years, and that $600 would have made a big difference in my life at that point.  But I had no control, so there was nothing I could do about it.  After I started working full time, I rolled that $600 into an IRA.  I never added another penny to it. And due to the power of compounding interest, by the end of 2021 that $600 had grown into $8,600.  That’s more than 14 times the original investment.  And all I had to do was leave it alone for 30 years.  Now imagine how much growth would come from 12% of your starting salary, rather than just a few hundred dollars.  And keep increasing it as your salary grows.  Slow and steady wins the race when it comes to retirement savings.

It’s true, however, that the stock market has its ups and downs.  That $8,600 I had at the end of last year is currently only worth $7,300.  The stock market has not been in a great place recently.  But you should never let that deter you from putting money into your retirement fund.  I look at bear markets like I look at shopping the sales.  When the price is low, you get more for your money.  So right now my regular retirement investment is buying more shares than it was at the end of 2021.  My retirement investment is on sale!  Slow and steady.  The market will eventually turn around again, and the painfully large drop I have seen in my total account balance this year will bounce back, likely with a euphorically large gain (and so it will continue, up and down like a roller coaster for the rest of my life).

Even with the volatility in the stock market, because I’ve been consistent about contributing to my retirement fund over the last 30 years, I know that I’ll be able to retire comfortably to the RV of my dreams in only five to seven more years.  It seemed like an eternity away when I started my first job in financial aid in 1993.  But time has a way of passing more quickly than you expect it to.

When it’s time for you to select your benefits for that first big job, take my father’s advice and prioritize your retirement contributions.  You won’t regret it.