Advanced Personal Finance

Yesterday I listed just two of the many stupid mistakes I’ve made with money. I promised to tell you about a couple of smart ones today. This post didn’t come quite as easily…

• I enrolled in my first company’s 401(k) the very first day of work. The first real company I worked for (after I got out of the Army) had a really nice 401(k). I knew about saving for retirement and 401(k)s in particular from reading a personal finance book (Making the Most of Your Money by Jane Bryant Quinn - I highly recommend it) that set me on the right path financially. So at age 26 I started saving for retirement. When saving for retirement, in my opinion getting started early is the most important factor. See principle #2 from this post at My Money Blog for an example that illustrates the point well.

• I’ve never taken a loan or cashed out a 401(k). One of the dumbest things you can do with a 401(k) is take a loan against it or, worse yet, cash it out when you leave an employer. Both times I’ve changed jobs, I’ve rolled over my 401(k) to an IRA.

• Our family has invested something each month since becoming debt-free. Even when times were lean (e.g. my wife quit working to stay home with our daughter) we managed to invest at least $100 per month. We’ve used the power of compounding and dollar cost averaging to build our assets by paying ourselves first.

• I got a will and life insurance when our daughter was born. Having a will is critical when you have others that depend on you. You DO NOT want the government to decide how your family will be taken care of. Make sure you have enough life insurance, too.

These aren’t earth-shattering moves. They’re things anyone can do to improve their financial situation. Anyone care to share their smart moves?

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This entry was posted on Tuesday, May 1st, 2007 at 8:02 am and is filed under Records, Tax planning, Retirement, 401(k), Investments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.