Soon, Small & Simple

As I have become more and more interested in personal finance over the past several years and have read countless posts on dozens of different sites from Twitter to people's personal finance blogs to Reddit to finance newsletters from all corners, I have taken on a new perspective on the boundless world of personal finance.

Nobody asked me in particular to become a personal finance blogger, and I'm certainly nowhere near the heights that such famous bloggers like Mr. Money Mustache, the Physician on FIRE, J.D. Roth of GetRichSlowly, the Financial Samurai and others have attained.  Several were profiled in this month's issue of Kiplinger's magazine, a publication that I have subscribed to since around the time that I made my first investment into a mutual fund in '94.  

I still find it a worthy thing to do to add my own voice to the millions of others who write about this means of exchange that impact most of our lives every day in some way, shape or form. For many of us, finance and money issues pose challenges, risks and opportunities to us every hour every minute of every day.

So today, my advice would be best utilized by those who have not become bloggers, millionaires, financial analyst, and members of the FIRE movement. This is best served for those just setting off on to the long road towards investing and improving their own personal finances.

Even though I am now of a Prime Age and rapidly approaching the age of forty-eight next month, this advice would be better for somebody fifteen to twenty years my junior to read. Maybe even somebody my son's age, twenty, or somebody even getting their very first part-time paycheck from a high school job after school.

My advice is this: You should invest soon if you have not yet started, you should invest small if you don't have much extra to invest or you are apprehensive to begin putting money out there for something that you don't tangibly buy and hold in your hand, and you don't need to spend countless hours investigating various stocks, options or mutual funds because, in many cases, the simpler your investments are, the better.

Soon.

There's an old Chinese proverb that I often think about when it comes to finances and even other things like your career path or education or where you should live, who you should marry or not marry, and other paths that you have taken or perhaps not taken.

The proverb is that the best time to plant a tree was twenty years ago, the second best time to plant one is now.

I planted my financial tree and began investing over twenty years ago. If I had to put a date on it, it was around the age when I turned twenty-four, having just become a probation officer in the big, crime-infested city of Chicago, as detailed in my eBook, The PO.

My late grandfather on my mother's side had been an avid investor for decades at that point. He was a tried-and-true Boglehead before I had ever heard of the term. He read all of John Bogle's books, he bought them for me and insisted that I read them, and he had all of his life savings invested in various Vanguard funds, including two that I hold to this day upon his advice, those being the Primecap fund, which has been closed to new investors since 2009, and my favorite all-time sleep well at night fund, the Wellington fund.

My grandfather was a Boglehead before the term was used.

So if you have stumbled upon this and you do happen to be in your early to mid-twenties, I'm not just saying to start investing soon as somebody who has just recently done it himself. I had the benefit of my grandfather extolling the wisdom of long-term index fund investing from the time I got my first "real job."  I didn't have much money to invest at the time, of course, but I did start squirreling away fifty here and a hundred there when I could. I didn't necessarily put it into a Roth IRA account, as I should have. but there's another old saying that you can't go back in time, and I have found that to be true over my 4.8 decades here on Earth.

However, some of those fifties and hundreds that I invested back in the mid-to-late nineties are most likely some of those very same dollars that I transfer from our savings account every month to help fund my wife's Roth IRA account to the tune of $500 per month these days. After all, even though most of us, myself included, do not think of money this way, it is completely fungible.  The dollar in one account equals the dollar in another.  The five that you spend on a latte equals five out of the hundred and seventy that you send to the cable company.  Same as five dollars' worth of gas when you pay fifty bucks to fill up your tank.

The reason that I did not send those dollars over the ensuing years to our IRA accounts instead of our savings account was that I always want to have at least six months or more of emergency funds at hand in the worst case scenario that I lose my job and I'm not able to replace my income in a timely fashion. I know that I wouldn't want to withdraw any money from our IRAs once it's there, but I would not hesitate to tap our savings accounts if need be, and I have done so from time to time and certainly will again.

But this is not meant to be a long story about my personal investing history. It is meant to urge you to begin investing soon if you have not already begun to do so.

Trust me on this: there will always be emergencies that require money, trips to plan, lessons to pay for, broken appliances, car repairs, computer repairs, new iPhones and flat screen TVs that you want to buy and so on and so forth. If you are more liable to spend the money rather than to save it, the mantra is to Pay Yourself First before you pay all your bills and your wants and needs are paid for, and it doesn't have to be a huge amount. In fact, when you're just getting started, there's nothing wrong with small amounts or even very small amounts.

Small.

I am, by no means, claiming to be a prodigious saver. As a matter of fact, by most metrics and recommendations of how much you should have saved by a certain age, I am well short of where I should be. But I do save a decent amount of my income at this point of my life despite having a fairly high cost of living for a suburban middle-class family. Our family's typical month sees anywhere from $8,000 to $10,000 entering our checking account, and $10,000 to $12,000 or sometimes more leaving our account. Not to say that we are profligate spenders, but we do pay for our son to attend a private liberal arts college in the Chicago area and I always make sure to Pay Ourselves First on an ongoing basis.

I also use the term "entering our account" rather than "earning" or "making" since I transfer funds from two other accounts on a monthly basis.  Likewise, I do not use the term "spending" since I invest a minimum of $1,300 per month while Paying Ourselves First.

But turning the calendar back about fifteen years ago, when we were a young family with two small children and completely relying on my income of about $50,000 per year, it was not exactly an easy thing to do to invest for our family's future.

For our children's college funds, I would send a few hundred dollars per month and steadily ramp that up to the point where I automatically contributed $500 to each of their accounts automatically on the first of every month for a period of about four or five years. If you want to save $100,000 for each of your children's education funds, as I did, this is likely the best way that you can accomplish it if you're a regular person with a middle-class type of income.

Those same years, I was sending far less than that to my own IRA account and even less to my wife's.

I would sometimes not send anything or just send $100 a month to my account, not feeling very good about it but doing so nonetheless. Some months I would send $200 or $300.  Sometimes I would even send $400 or $500, but those months were few and far between.

There's no shame in starting small with your investing. For quite a few of those years, my goal was to invest $2,500 into my IRA account, which really just amounts to $200 per month plus an extra $100 at some point during the year.

I was millions of dollars away from becoming financially independent and retiring early, just as I am now.  I was just trying my damnedest to support my family from month-to-month, like so many other Americans do.  Thoughts of getting ahead were not even considered and millennials were only children at the time.  There were some harsh Recessions, to boot.

Perhaps you are not even be in a position to fund your account with $2,500 per year. However, if that's the case, I would suggest sending at least $100 per month or stretching a bit for $150 per month if you can, which is the equivalent of five bucks a day.

The shame isn't in starting your investing with those small amounts. The shame is in not investing at all for your future. Things are not going to get any cheaper in the coming years and robots and other means of artificial intelligence are not going to stop taking the jobs of low qualified workers.

Despite all the political rhetoric to the contrary, this is a YO-YO economy. You're On Your Own.

Don't expect anybody or any entity or company to support you in your later years; you've got invest the dollars that you make today to help out the you of tomorrow far into the future. You also don't have to be in investing genius to do this with an understanding of different types of markets, foreign or domestic stocks, bonds, index funds and the like.

You can make it much simpler than that if you want to.

Simple.

For my wife, I opened an IRA for her in January of 1999 with a $1,000 check and invested in what I thought was the simplest fund at the time; the Vanguard S&P 500 Index Fund.

Whenever I explain this fund to anybody, I always say that these are the everyday companies who's products and services you use everyday without even thinking about it. Companies like Facebook, Apple, Google, Microsoft, McDonald's, Coca-Cola and all the big oil companies,automakers and tech companies. Stores like Kohl's, Target, Walmart and other major retailers.  The drug makers that make your medications.  Household names, for the most part.

There's even simpler funds than that.  Vanguard has a total International stock index fund, as do most of the other large investment houses like T, Rowe Price, Fidelity, American Funds and the others.

You can buy index funds or ETFs of all types of ilks if there is a sector that you favor over the others, but that becomes less simple.

The simplest thing is to invest in a low-cost or no load, meaning no charges, mutual fund that reflects the stock market or some broader market as a whole. It has been proven time and time again that there are very few stock pickers that can consistently outperform their benchmarks.