Roth Ira Challenge: On Getting Started

Roth IRA Challenge: On Getting Started

Today on the blog we have Andrew from Quest for Billions. Andrew is a young Canadian trying to optimize his life and finances.  Today, he’s here to talk about how he got where he is today. His progression is so similar to my own and maybe you can relate as well. If you’re earlier on in the progression, it will give you an idea of where to go next! And now, here’s Andrew…

I didn’t even know what a Roth IRA was three years ago. I was in my junior year of my undergraduate degree and up until this point in my life, I had always been good at saving, but I knew very little about investing. I by no means have everything figured out today, but I am miles ahead of where I was three years ago. Here’s what I did…

1. I Started Reading

“Reading is the best return on investment. You have to live your entire life in order to know one life. But with reading you can know thousands of people’s lives for almost no cost. What a great return!” James Altucher in The Choose Yourself Guide to Wealth.

One of the first books I read for pleasure (or should I say one of the first books that I was not forced to read for school) was The Wealthy Barber by Dave Chilton. Before reading the book, I knew nothing about personal finance. After, I still didn’t know that much. However, the book was the spark I needed to want to read more. I was eager to keep learning.

After a quick Google search for “best personal finance books,” I found myself reading A Random Walk Down Wall Street, then Rich Dad, Poor Dad, then Your Money or Your Life, then I Will Teach You to Be Rich, then The Millionaire Next Door, then The Wealthy Barber Returns, then The Choose Yourself Guide to Wealth, then The Automatic Millionaire, then The Total Money Makeover, and then The Little Book of Common Sense Investing. Also, Thinking Fast and Slow, and What I Learned Losing a Million Dollars are great reads to learn more about the psychology of investing.

2. I Started Investing

Learning is easier than taking action. It is one thing to read about what we should be doing when it comes to investing, and it is another to actually start. Investing for the first time is intimidating. It’s difficult to get over the fact that you can and will lose money at some point, at least in the short term.

In the beginning, I struggled from analysis paralysis. Stocks and bonds or stockings and bondage or chicken stock and James Bond? Just kidding. But in all seriousness there are so many different options to consider and decisions to be made. Roth IRA or 401(k)? US investments or international investments? What percentage of US investments vs. international investments? Individual stocks or mutual funds or ETFs? Which stocks or mutual funds or ETFs? Vanguard or iShares or…? What was the result of the overwhelming number of choices I had in front of me? I delayed getting started.

I came across a wonderful quote in The Little Book of Common Sense Investing:

“The greatest enemy of a good plan is the dream of a perfect plan. Stick to the good plan.”

I’ve always been a seeker of the perfect plan, especially when it comes to my finances. I tried to look for the best bank account, the best credit card, and the best investments. Optimize. Optimize. Optimize. However, I need to do my best to realize that for many things in my life, like investing, good may often be good enough. This is especially true when you are first starting out. You have time on your side. It’s okay to make mistakes. An even bigger mistake than getting started and making errors is continuing to postpone getting started in the first place.

3. I Started My Blog

Towards the end of 2015, after following some prominent bloggers in the personal finance community for a few months, I decided that I wanted to start my own website. I had no idea what I was doing. But in November 2015, I started Quest for Billions anyway. There are a few advantages I have noticed about having a blog…

Making your goals public is a powerful motivator to stay on track

I was listening to a podcast featuring Jesse Itzler, the co-founder of Marquis Jets (a private jet company which sold to Warren Buffett’s Berkshire Hathaway), the owner of the NBA’s Atlanta Hawks, an endurance athlete (he ran a 100 mile race), and former rapper. I encourage you to listen to the podcast (The James Altucher Show, episode 163). Jesse mentioned something interesting – around 99% of people who start running a marathon in the United States finish the race. Having recently run a half marathon myself, I can attest to the difficulty and can only imagine how tough a full marathon (26.2 miles) would be. Yet, pretty much everybody finishes. Why? Having friends and family know that you are doing the race (and will ask you about it) combined with the thousands of people watching you run is a strong incentive to push through and complete the race, despite every inch of your body screaming at you to quit.

Blog posts have a similar (but less physically exhausting) effect. Once we take a stand, especially when we have made that stand public, there is a strong drive to maintain that stand in order to look like a consistent person. When I act in ways inconsistent with what I write about, I feel worse about it than I would if I didn’t write about it at all. This idea is known as cognitive dissonance, and it is a powerful motivator to stay on track.

You notice “best practices” by following a community

When one person is doing something different than most people, that person might be crazy. When a group of people is doing something different, they might be on to something. I noticed that most personal finance bloggers track their net worth in some form. In January 2016, I started as well. Each day, I write down my purchases in the notes section of my phone, and after every month I transfer that information to an Excel document on my computer. I track the value of my expenses, income, and investments on a monthly basis. In order to see improvements, you need to have some baseline metric to compare future numbers against.

One note of caution with this. With the rise of robo-advisors and financial apps, we can now get real time updates of the value of our investment portfolios straight from our smart phones. It’s convenient. But for me, the convenience was a double-edged sword. Sure it is easy to get an update, but because it was so easy I found myself checking the value of my portfolio multiple times a day. It was an addiction, and I ended up deleting the app off my phone so I would stop. Financially, the harm is not checking your portfolio, but buying and selling, as you incur taxes and trading fees. However, there is an emotional harm from these constant real time updates. The markets are volatile and seeing that you have lost money sucks. Monthly updates are helpful. Hourly updates are not.

Final Thoughts

Reading, investing and blogging are not groundbreaking ideas. But with a little consistency, great strides can be made over time. I’ve come a long way in the last three years and I still have a long way to go. But hey, at least I know what a Roth IRA is now!

What sparked your interest in personal finance? Was it a book, a friend, a family member…? Do you have any book recommendations?

Disclaimer: This post may contain affiliate links which, at no cost to you, helps support Northern Expenditure and keeps our heat on in the winter. Thanks!

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12 Comments

  1. “When one person is doing something different than most people, that person might be crazy. When a group of people is doing something different, they might be on to something.” That is awesome! A huge benefit of blogging for me is going from feeling like I might just be the one crazy person to being part of a group that seems to be on to something.

    • MaggieBanks

      These is my people! I love this community So. Much. (that’s why I’m finally going to FinCon!)

    • Andrew @ Quest for Billions

      I could not agree more! The community is filled with people who continually challenge the status quo. I find the curiosity and drive to be different very inspiring. Most people may think it’s crazy. But like you, I think the group is on to something.

  2. Thanks for sharing this post Andrew! Reading of course is nothing new, but it’s importance can’t be understated. There is just SO MUCH information out there these days! And very good point about blogging and putting yourself out there. It’s really a great motivator!

    Sometimes reading isn’t enough if you don’t understand though, haha. I remember picking up automatic millionaire when I was in high school. I understood the concept of saving, but never could figure out what the heck a Roth IRA was until I was in my mid 20s! As a result, I left college without anything saved. Oh well, live and learn.

    • MaggieBanks

      Luckily my dad preached Roth IRAs and had a small one set up for me. Unfortunately, I cashed it out to buy a house. Live and learn.

    • Andrew @ Quest for Billions

      Thanks for commenting! Good point. You can get so much more value out of a book by having some baseline knowledge about the topic. But everyone has to start somewhere. I also did not understand the specific investment lingo when I picked up my first personal finance book. My big takeaway was knowing that I wanted to learn more. The books were a spark for future exploration.

  3. Thank you Andrew for sharing!!! Reading is such a valuable tool. One of the things I really started to do this year was read books/articles that were the opposite of where I thought/think I stand. This allowed me to further analyze my perception and perspective on issues and has has created some insights that I wouldn’t probably. While many of these topics were unrelated to finance I feel like it has opened my eyes to incredible investment ideas. With all that said…keep reading and learning 🙂

    • MaggieBanks

      I love this thought. It’s always helpful to expand our minds and thoughts and opinions. “Keep reading and learning” is a great mantra!

    • Andrew @ Quest for Billions

      Awesome idea! It is easy to focus on information which confirms our beliefs – it is much more difficult (but helpful) to seek out ideas which challenge our own thoughts. I was recently reading a book on the topic of history and evolution called Sapiens which sparked quite a few ideas related to my personal finances. There is so much to learn from different domains!

  4. A friend gave me a copy of The Tightwad Gazette, and I started playing around with personal finance. It didn’t take hold until years later, though. Even though Overcoming Underearning made a big difference in my life, it was Mr. Money Mustache’s post about “You Debt is an Emergency” that made consider attacking it with all my energy. Since then…well, sometimes it feels like ALL I’m interested in is personal finance! But really I’m interested in crafting a life that I love, and personal finance is a lens through which to look at what I’m doing and who I’m being.

    • Andrew @ Quest for Billions

      Wow, that’s pretty amazing that one post was the tipping point for you to take action! My interest built up over the years as well. It seemed like the more I read, the more intrigued I became. Now, even if I am reading something from a completely different subject, I find myself asking, “How does this relate to personal finance?”

    • MaggieBanks

      I also love that it was one blog post that tipped you over into ACTION. I think maybe that’s what we’re all trying to do. If one post of mine leads to one person doing that, it’s worth it all, right?

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