A non-trivial part of my anxiety in life is about money. This has been true even long before I was living on a grad student stipend in Los Angeles. The short version is I grew up in an upper-middle-class family until the recession started to hit around my final year of high school. Turns out that doing a 180 from taking annual family ski trips to seeing your family lose their house will really mess with you. And while I was still very fortunate to go to an elite private school for undergrad, it made me hyper aware of how little my family had compared to most of my friends and classmates. As a result, my brain tends to default to survival mode and always worrying I don’t have enough money squirreled away for an economic crisis, no matter the number in my savings account.
I’ve been working lately on better understanding this source of anxiety so I can more quickly tell my brain, “Yeah I see why you think that, but here’s X, Y, and Z reasons it’s not true” and move on with my day. Recently there have been two amazing resources helping me focus on this. First is discovering the podcast: Bad with Money with Gaby Dunn. Seeing similarities between myself in Gaby re: frustration with the system and the barriers to entering has made me feel much more normal in my position rather than constantly anxious and ashamed of that anxiety.
The second resource I discovered because a friend saw me comment on twitter about Bad with Money. This friend got wildly invested in the host Gaby because finance and investing are hobbies of his, and he wants to know that Gaby is gonna be okay. As a result, we started talking about the show and I learned about his interest in personal finance. It’s quickly grown into a real mentoring situation where he gently nudges me on my stubborn misconceptions about finances and especially investing.
This past week he pointed me towards two really key points about Roth IRAs (post-tax retirement accounts):
1) Most companies don’t have insanely huge minimums anymore.
2) You can deduct your contributions (what you personally put) from a Roth IRA without penalties regardless of your age. (Note that this is not the case with a traditional IRA where you deposit money pre-tax.)
The first point meant my old belief that you needed at least 10K to open a Roth was wrong. And this second point was key because it means that I can move a chunk of money from my regular savings account (which earns negligible interest) to a retirement account that will earn ~4-6% annually, but still have access to some of it in case of an emergency. (I have two credit cards with large enough limits that I could use those in the time it would take to transfer my money out of an IRA and pay them off in full before the due date). So, my plans for this Labor Day weekend includes opening a Roth IRA to complement my traditional IRA from my pre-grad school days.