In a post in 2010 I promised myself (and you) that I would have a plan for retirement in place before I turned 26 at the end of 2011.
ehh?
Though a little late. This is that plan…. it’s not going to be as specific as I would like and I’m hoping you can help me with this.
A short backstory:
I invested $50 into a mutual fund for 4 years, from age 19, through a full-service broker (Freedom 55). The whole thing was essentially set up by my parents who arranged the meeting and to be honest, I didn’t quite understand everything that was happening. My parents meant well with their initiative, but when I protested saying I didn’t want to sign something I didn’t understand they told me I should trust them and do it, so I did.
Unfortunately during those years I wasn’t really interested in finance. (Feel free to give my younger self a swift kick in the behind there) I have learned a lot since then and now I do want to learn. I want to become educated about the different investment instruments, how they work and which one is best for me and my plan for my future and in the process write about it and help others become educated about it too.
I withdrew all my mutual fund contributions in 2008 to pay off my car. At the time it didn’t make sense to me to have a student loan, a mortgage, two credit-cards and no savings, yet have this fund just sitting there not doing a whole lot.
I was fortunate to withdraw when I did, shortly after I withdrew the markets tanked (talk about timing?) this particular fund has not yet recovered. Because I used the funds to pay off my 6% car loan I gained at least 6% by making this move so I don’t regret withdrawing my funds. I do regret not getting my financial-act together sooner. *insert appropriate blushing here*
What I want to do and why
To start, I joined the Money Pros Index Fund Challenge to encourage myself to learn a bit more about stocks etc. One of my goals for 2012 is to begin investing. Now that I’m debt-free (!!!) (except the house) this will be a whole lot easier considering I’ve freed up some cashflow.
I want freedom, financial freedom and to reach that goal I need to plan ahead. I want to create passive income and I’m not going to do that by sitting on my butt.
Every penny counts
The power of compound interest is incredible, I used this calculator to determine that an initial amount of $167, with $2,000 added every year, compounded yearly at 8% (random interest rate for illustration purposes) for 25 years will yield $159,052.53. That’s a very nice chunk of change for such a small contribution every month.
The actual plan!
I decided that starting this month I will contribute $167 monthly to some sort of investment to reach my goal of $2,000 invested for 2012. This isn’t a lot of money, but it’s something towards a long-term savings goal.
While researching on where to put this monthly $167, on December 25th of all days, I found myself opening an ING Streetwise self-directed RSP at 1 in the morning and threw my first $100 in it.
I have learned a bit about how stocks, bonds and other instruments work throughout my education (I am, after all a business student) but for some reason the bookstuff never clicked with the ‘real’ stuff. I want to learn the real-life applications, not the theory and definitions of stocks, bonds and common shares. How do I actually do it?
I don't know, you tell me
Tell me where to put my cold hard cash:
I’ve got the ING Streetwise fund set up, which is where I’ll be parking my $167 monthly contribution until I learn more. I have an inkling of the options I have but I don’t know what’s what or what’s best for me and really I actually want to learn about investing, how to do this MYSELF and what my options are.
I don’t just want to hand someone my money and have ‘them’ send me paper statements every month like I did before. I feel a little lost but it’s time for action, not wandering around aimlessly.
After setting up the RSP I picked up the Forbes/CFA Institute Investment Course, looks like an interesting book to learn a few things.
I could use some advice on investing options, do you have any tips, books or other articles or suggestions for me? Investing for dummies? I would love to hear from you!
I’m loving how Warren Buffett’s head is now popping up in the ads in the sidebar.
PS: IMG source here.
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Great that you took the challenge, Andrea. It'll be interesting to see how it pans out.
Posted by 101 Centavos | January 15, 2012, 10:25 amSo glad you are doing this, I feel like I finally am ready to take the investing leap. It took me long enough.
Posted by Niki | January 16, 2012, 12:38 pmIt is very confusing, all the 'instruments' and 'vehicles' and other engineering terms used to confuse everyone. But in the end steady investing should lead to some income . My preference would be in real estate so buy into REITs…
Posted by John@MoneyPrinciple | January 16, 2012, 6:30 pmCan you do that through something like Questtrade?
Posted by Andrea | January 18, 2012, 3:42 pmDo you have to actually invest in the Index Challenge? I'm tempted to try it too….
Posted by AmericanDebtProject | January 18, 2012, 5:59 amNo you don't! The deadline was Dec 31st, we all picked three REAL stocks and invested $1,000 imaginary dollars in each. Mine aren't doing to well, I picked Enbridge, Oriental Technology group and… Walmart. We'll see at the end of the year though! It's the first time I'll actually have picked a stock and kept track of it for a year, you could still do the same thing on our own and follow along, I'm expecting to learn a bit at the very least
Posted by Andrea | January 18, 2012, 3:43 pmI divide my efund into searevl buckets’ there’s a job loss bucket, and a deductibles bucket and a car/house emergency bucket. By keeping the accounts seperate (I love ING for this they let you have as many linked accounts as you need), I don’t feel like I’m starting over if I need to tap one of the funds.For example, I just bought a new to me car and a big chunk of the car budget was added to the down payment (since the new car is under warranty I don’t need much in that bucket right now). But my job loss, insurance deductible and house funds were not impacted at all and grew at their normal rate this month.
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Posted by Streaming Soccer | May 15, 2012, 10:15 pm