Photo by Jeremy Bezanger on Unsplash Ever since I got my start in self-directed personal finance, I felt an urgent need to assemble the greatest collection of assets that is humanly possible.
I can’t be the only one who subscribes to this necessity so I’m sure a few of you have spent a little too long in a daydream at least once before.
Besides, who wouldn’t want to have a financial arsenal that rivals the world’s richest? Not this guy (me)!
If by chance, you haven’t dreamt of your financial “once upon a time,” you’re about to find some brilliant inspiration and even a good idea of where to begin.
Self-directing your finances can be extremely profitable and insanely fun at the same time!
Without further ado, I present to you what very well could be… The Most Profitable Listicle in Personal Finance History
Every good listicle must come with an epic starting point. That is no doubt the case here today, so allow me to introduce what I think should be the first investment on everybody’s financial bucket list. If you guessed it, let me know down in the comments.
The Roth IRA was indeed my first investment of choice and for very good reason. Let me share with you the power of this investment vehicle!
Important distinction: I use the word “vehicle” for a reason. A common misconception among those who are not familiar with retirement investing is that the Roth IRA is the investment. As a matter of fact, it is not. A good way to think about it is similar to shopping at the grocery store. The Roth IRA is your shopping cart, and you need to choose which investment products you want to hold inside your cart! Simple, right?
I would hate for you to open a Roth IRA thinking you will wake up a millionaire one day only to realize the money is sitting there stagnant. Believe it or not, I’ve heard stories about this happening.
The Roth IRA is an individual retirement account (IRA). It’s funded with post-tax money which means you have already paid Uncle Sam. Since you were so nice to give him your hard-earned dough upfront, he will allow your investments to grow handsomely, tax-free, AND allow you to access your funds, again, tax-free!
After age 59 and 1/2 that is…I know, I know. I can already hear you screaming.
“59 and 1/2 years? That’s so old!”
Yes, I agree that is a relatively late age to access the money penalty-free, but at the end of the day, it is a retirement account. The reason to start investing so early (I just turned 22) is to take advantage of what Albert Einstein likes to call the eighth wonder of the world: Compounding. Or in this case, compound interest. This is one of my favorite concepts in the world of investing and I think it will soon be yours too.
Allow me to show you something… Image by author This is a compound interest calculator from my friends over at Moneychimp.
You can see that if we start with $0 and contribute the current maximum annual investment of $6,000, compound it over 40 years at an average rate of 8%, we end up with the princely sum of $1,678,686.24. Not bad, huh?
This assumes that we start at 20 years old and stop at age 60. Leave it in for a few more years and that account value could easily be over 3 million. That’s the beauty of compounding baby!
The Roth IRA is an epic first investment and I’m so glad I jumped on board. Now that we have the stock market box checked off, we need some dirty, filthy, crypto tokens.
I’m kidding, I’m kidding. Microcap crypto coins are not my thing.I am a big believer in blockchain, however, and I think cryptocurrencies have an immensely bright future. I’m a fan of Bitcoin, Ethereum, and a few of their other counterparts, but even these are not my saving grace in terms of financial security.Right now, you can hold something called a stablecoin. These are cryptocurrencies that aim to hold the value of the dollar. The best part? You can earn crazy interest on them at places like Voyager . They will currently give you 9% on your USDC (my stablecoin of choice). 9%! Try asking your brick-and-mortar bank for that and I think they would slap you across the face.These cryptocurrency brokers will even pay you interest on other coins like the popular Bitcoin and Ethereum. I love having crypto as my accessible money multiplier. […]
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