Jon Bon’s Money

            In high school there was a young man, let’s call him Jon. He drove a not so nice car though out high school, but what he really wanted was a 1997 Honda Civic. They were the coolest thing going. They were affordable, decently fast, had a sporty look, and were a great high school car. Now Jon did not have much income in high school, and would have had trouble buying a 10-15 thousand dollar car on his own. The costs were just not feasible at the time, but he wanted a car just the same.

            Jon Graduated high school and went on to college, where having a nice car, or even any car at all was a huge luxury, and could be easily done without. Jon realized that if he had spent all his money on a car in high school, and making payment though college that it would have been a foolish mistake. The car would be been four years older, it would start to break down, and he would have had trouble paying for it.

            After College Jon did not even want a 2006 civic, let alone a 1997 model. If Jon had bought the 1997 civic odds are he probably would still be driving it.  He realized that often short term wants should be put off to meet a longer term goal that is a lot more profitable. Driving a junker in high school and college was the best thing for Jon.

            That is how I feel about condos. Yeah I could afford one, and you can usually get a newer one in the area that you want to live in, but it’s a condo. Condo’s work for single young people with out pets, who don’t need a garage, and don’t mind that you will never get any appreciation on it beyond the rate of inflation. I feel the only reason I would buy a condo is because it is new. In 5 years or so I go to sell, its 5 years older and not as nice. Am I going to show lots of appreciation for my no-so-new condo? I would say no, especially with new condo complex’s being perpetually built just down the street…. So yes I want a house with a yard, and no condo fees. A condo would be a short sighted fix for me, when a house would be a much smarter longer term goal.

So I wait….

 This week my old man called me to let me know that he had invested around $1300 for me in a Roth IRA. He said it was from back when I was 1st making income at McDonald’s when I was 15. Now I love my dad, but he is a horrible investor. He should only stick with mutual funds, and what his adviser (his brother in law) tells him to do. The two stocks that he hand picked and invested heavily in, both went bankrupt. 

Also the man has too many accounts and loses track of what he owns. Enter one Charles Schwab Roth IRA. He called me to let me know that I was $1300 richer, which I was happy to hear. There are two main points about Roth IRA’s that I would like to make. 

First they are awesome, you pay tax on the money before you invest it, and that makes your withdrawals tax free. My Roth IRA with the Vanguard Group, and the 401k with my job are my main avenues to making it to a net worth of $1 million by age 40. The even better news is that the balance counts towards contributions from years back when I was in high-school. So for the 2008 calendar year I can still make the full $5000 contribution rather then $3700. 

Secondly you have to have a Roth IRA. “Not I will open one soon” or “I can’t afford it right now”,  if you know what they are, and you don’t have one punch yourself in the head right now. I am not going to beat a dead horse, because everyone writes about this but this is the best way to save for retirement. You have no excuse for not having a Roth or a 401k investment vehicle. 

Nothing in life is a “sure thing,” but opening and fully funding a Roth in your twenty’s has to be the fastest and safest way to reaching the $1 million mark.