Episode three eighty one, the six week roth Ira Challenge. Welcome to the Frugal Friends podcast, where you'll learn to save money, embrace simplicity.
And live a life.
Here your hosts Jen and Jill. Mm hmmm, Welcome to the Frugal Friends podcast.
My name is Jen, my name is Jill.
And I love uninvesting episode. We don't do them a lot.
Nope, because because of me.
No, it's because because there's so much to be said on the topic of how to spend money and how to save money. But coming from a background, as you know, a financial writer and investing was like what I wrote about specifically retirement, I don't I do not talk about the stock market. I'm not a broker, I'm not Wall Street. I just love helping people understand and save for their
future selves. And that is a big reason why we pursue saving money and spending less so that we can live full lives now and full lives in the future. And that comes through investing. And so we are doing a special six week challenge for all my roth Ira girlies.
Yeah, do you want to say why it's a six week challenge?
Okay? So the tax deadline for you to invest in a roth ira for the previous tax year is tax day, so this year it's April fifteenth, twenty twenty four. That is your deadline to open and make any contributions to a twenty twenty three wroth ira. And so we're again we're not we're not financial advisors, we have no credentials in that. We are not going to be telling you if a roth ira is the best choice for you. That's stuff you're gonna have. That's the research you're gonna
have to do on your own and decide. But for a lot of people, roth aras are a really, really good option, probably for ninety percent of you. So that's why we're going hard into this. So we want to
challenge you. This six week challenge is open and or contribute as much as possible as you can to your twenty twenty three roth ira because you do not get this year back if you, like I was telling Jill, because she's asking me, like why are we doing this, and I'm like you cause you don't get twenty twenty three back. There are so few grace periods in life, right, and this is a grace period. Twenty twenty three is over, but you still have the opportunity to invest in your
twenty twenty three rathhiae until April fifteenth. Even if you've already done your taxes, you can still contribute to this. And even if you make more money in the future and you're maxing out your wrath areas and you're like, I want to contribute more to my wrath aray, you can't. You can't, but you can right now if you haven't maxed out your twenty twenty three wrath aray. So that's we're getting in under the deadline, going hard over the
next six weeks. You tip, you technically have eight weeks, but if you're listening to this episode within two weeks.
Jen also particularly is really jazzed about this episode because the whole thing is a vulnerability round for me. No, no, no, but truly, I think stay tuned because before we hit record, there were some questions that I had though I like, I think that this is worth talking about, but before we hit record, I want to be able to talk about it in a little bit more safety and I'm
glad we did, and I'm glad that we did. So there's some things that I and learning and it's valuable to share that that will come out throughout the episode. So yeah, you're getting You're getting both the expert and the lived experience of no great experiences.
And we'll again disclosed off the top, this is not investment advice. I sometimes feel silly even still referring to my past as the as a financial writer, because I haven't written for other people in over two years at this point. So I really focus on frugality, saving money, conscious consumerism all that. That's where all my energy goes into. So I don't I no longer consider myself an investing expert,
but I'm definitely investing a passionate for you. And you can invest and say for retirement, even if you're not an investing expert. And so that's why we're excited for this episode. But first, this episode is brought to you by No Fear. Sometimes people don't invest because they're afraid as soon as they tie that money up for thirty plus years, they're gonna need it. Well, no fear here because we use wrath IRA's and you can withdraw your contributions to wrath Ira at any time for any reason.
So if that was you and you're like, I don't think I'm gonna do this no fear, no fear here, and even after you've had the account for five years, you can within with draw some growth for certain reasons. So if you have more saving fears that you want debunked, then get the Friend Letter. We're focusing on investing over the next six weeks, not heavily but just lightly.
Uh.
And we're still gonna be bringing you the freebies, the saving hacks, all that frugal Friends podcast dot com, but we are going to include a little extra investing content.
Yes, and we've got more people on our team helping us to write the friend Letter, which is soup are fun to engage, more voices, more perspective, so even more reason to get it, because it's not just the Gen and Jill echo chamber that is the Friend Letter.
Now, yes we are, we are very excited. So in the front leader, we asked you guys because we wanted to know where you are at. You know where you're investing at for retirement and most of you, sixty five percent of you are only using your employer plan, your four one K four or three B four fifty seven stuff like that. Only like you know, is thirteen thirteen people out of all of the people we surveyed. This
survey was a while ago. We're using a roth ira, and some of some people weren't currently saving for retirement, So we definitely are encouraged that a lot of you, most of you are saving for retirement, most of you are not using a wrath ira. Well, we did see some people are like they're primarily using employer plan and supplement with a roth ira, so that's great. We love that too. So we've had a lot of investing episodes over our almost four hundred, even though we don't do
them a lot. We've got episode two oh five how to Save for Retirement, and then a really good one if you don't fully understand roth iras and you want to know if it's good it's a good choice for you Episode one fifty eight roth Iras explained with Barba Guinty. That's a really good one to check out if you're
unsure if a roth ira is right for you. Today, we are going to go through a little bit of like the roth Ira verse four oh one k and some of the reasons that if for if a roth ira is good for you and you just have been putting it off, why it makes sense to prioritize that right now.
So this first article comes from time and it's tie wroth ira versus four O one K. What's the difference? So for those of you who are still needing that foundational level of information on what are these different types of retirement accounts?
How do I use them?
Really? With both a roth ira and a four to oh one K, they are accounts for which the government offers special provisions in an effort to encourage people to be able to build a nest egg. But there are some differences between the two. For many of us. Both are going to make sense to have, but to understand when is one over the other right for me? Are they both right for me?
All of that?
So, a roth ira is going to make sense for someone who doesn't mind paying taxes now in order to avoid paying them on withdrawals later, whereas with a four oh one K it makes sense for those who are looking for the tax deduction today and are prepared to pay taxes on the distribute later on in the future. Again, both often makes sense for people, and we'll go through some of the there are not everyone can invest in a roth ira. We'll go through some of those, but
those are some of the differences. It's really kind of what are the tax advantages of both. So a roth ira, you are contributing on money that you've already paid taxes on, you will not then pay penalties upon withdrawal, whereas the four roh one k you will pay taxes on the withdrawals later in the future.
Yeah, and so the reason we're focusing on the roth ara right now is because you can still make contributions to your twenty twenty three. Uh, if you've already max out your twenty twenty three and you want to, you know, do a challenge to get a jump on twenty twenty four, great for you, Good for you. And then also it
is self directed. You control your wroth ira, whereas your employer controls your fourro one k. So it's sometimes it's some employers make it really easy to get in there and switch things up, but other times it's not so easy.
With the wrath Heray, it's all you all the time, very easy to go in there every day switch things up at your leisure, and so that makes it really good for a challenge when you can keep an eye on it and really have that control and actually be able to do something that your later self will really thank you for.
So as far as the differences we went through, some of the similarities are that they're both retirement accounts. Differences
have to do with levels of contribution. So with a four to oh one K in twenty twenty three, the contribution limit the amount of money you can put to invest into it is twenty two thousand, five hundred dollars, whereas with the wroth IRA in twenty twenty three it was six thousand, five hundred dollars, So definitely quite a range there, a significant amount more you can be putting into the four oh one K versus the roth IRA. And those numbers are going Are they going up for twenty twenty four?
Yes, yeah, we'll talk about that a little later. Well, we're focusing on the twenty twenty three numbers for the challenge, but yeah, they went up in twenty twenty four, so you won't want to use those as your benchmark for the twenty twenty three.
Roth Now, there are also limitations for a roth IRA. It is not going to be an option for all people. So if you file taxes as a single person and you're modified adjusted gross income MAGI for short, I love that acronym must be under one hundred and fifty three thousand dollars for the tax you're twenty twenty three, twenty twenty four, it is going up to contribute to a
roth ira. If you're married filing jointly and your modified adjusted gross income is it must be under two hundred twenty eight thousand for tax year twenty twenty three.
So again, for.
A lot of listeners, we are able to invest in a roth ira, but if you are a higher income earner, this is not going to be an option for you.
If you're either.
If you're a single person and you make you know above that amount, or you're married filing jointly making above that amount.
Yes, So we are focusing on the roth ara a because the and I mentioned this a little at first, because you don't get this year back, right, but also because there are some withdraw rules that are a little bit more flexible for the wroth ara. So I mentioned that five year gap, right, So when you are opening a roth ara, even if you're not so again four
one K versus roth aray. We're not going to go in depth on how to choose, but for most people it is a good thing to have a balance of pre impost tax so and you can find that in actually both an IRA and a four to one K. A lot of employers are starting to offer a wroth four a one K option so you can get these same tax benefits in a four to one K. Maybe you're already doing that, that might be something to check
and then also consider your tax liability. Usually if you're a higher income earner exceed these income limits, then it's not gonna be any sweat off your back to not
qualify for a wroth Ara. But for most of us, we love we love the wroth Ira because of its full control and sometimes unfortunately employers don't offer the best options in their four A one K. So while it's still better than using a taxable brokerage, even if the options in your four to one K might be like high fee actively managed that sort of thing, you still you still make out better, uh with a four oh one K. It is good if you check to see if your four oh one K is high fee, then
to balance it with a roth Ira might make sense for you. So that's all we'll say kind of on the four oh one K versus roth Ira debate, You can find out a lot more in depth on the rath Ira episode we do with Barbara Ginti. She's a certified financial planner, so she she is super knowledgeable, not
just a you know, a schmuck with a podcast. So yeah, definitely look for somebody's expertise on this that has a CFP designation, either whether you're paying somebody for their advice, paying them a fee either hourly or you know, on a monthly basis, preferably hourly, or you're maybe looking for your social media content on this from somebody with a CFP designation. They have a lot more restrictions on what they can share openly, like what they're not being paid for.
But you're going to be sure you're getting more accurate information, not just some influencer with who went viral on social media or just you know, some well intentioned podcasters. That's what we'll say about that. So our next article comes from nerd Wallet. They have a lot of great articles
on investing and it's roth Ira withdraw rules. So the last article went into a little bit of withdraw rules, but we want to touch a little bit more on the five year rule all the reasons that it makes sense again to have a balance in these accounts, your four o one K and an ira, why it makes sense to maybe think a little more highly about your wroth aray. Don't just set her off to the side and think of her as an addition or a supplement.
This one's a helpful one for me. We even talked before we hit record of Okay, why are we focusing so much on withdrawals in the second part of the episode, and Jen was really helpful in laying the foundation for me.
So I'll turn around and do it for you in that if there is hesitancy in investing in something like a wrath ira, to recognize that withdrawals on a wrath ira are more flexible than they are on a four to oh one K. And so while we are going to advise, well encourage in an entertaining way that this is something we use for retirement, at the same time, knowing that you can still withdraw for certain reasons pre retirement, if something changes drastically in the economy or in your
own life, you can take back out what you have invested into the account. And so I think for a lot of us that can give a bit a peace of mind in beginning to invest for retirement knowing that there is a degree of accessibility to this. It's not entirely untouchable if needed for various reasons and if we meet some of these qualifications for withdrawal.
So there are a couple ways that you can withdraw investment earnings before your fifty nine and a half. So, so yes, contributions you make to your roth aray can be taken out at any time without penalty, no matter if you are currently investing, no matter how long you've had the account open. So it is a really if you are really nervous about tying your money up in a four oh one K, and maybe that's your hesitation for investing for retirement, the rath theray does really take
away that fear. And I mentioned even some of the growth investment earnings can be taken out as well, but there are some restrictions on that. So if you withdraw investment earnings before fifty nine and a half, there are there's a ten percent early withdraw penalty. These are very similar to the four to one K. There is a five year holding period, so you have to wait five years before you do any of these, and then if you withdraw earnings for reasons other than the specified exceptions.
So after five years, you can withdraw earnings, earnings and contribution for a first time home purchase, college costs, and a few other reasons. But the big one I see a lot of people use is for a first time home purchase. Obviously that's not ideal. We want to invest in a rath ira for a retirement, not for college
or for homes. But again, if if you have a roth ira and the down payment or something is keeping you from being able to buy your first home, I know that's a big barrier for a lot of people, then your roth aray can come to the rescue, but only if you've had it open for five years. And so that's another reason. You don't even have to be actively investing in it. You have to just have the account opened for five years and have made like, have
some money in it. So that is another reason we're doing this challenge is so that if you've been putting off opening a wrath ira, that you just open it, put something in it, and start that five year clock.
Yeah.
So the different qualifications for considering withdrawal is that fifty nine and a half number is the sweet spot for some reason, and most likely that's gonna end up creeping up higher than that by the time we get there.
You don't expect, but these.
Are some of the distinctions to be aware of. Is your age, your personal age, and the age of your account. So they've got these different ones. If you're younger than fifty nine and a half and your account is at least five years old or it's not five years old, those are the things that Jen just went through. Then you've got your qualifications of if you are fifty nine and a half, you have reached that status and your
account is still less than five years old. Let's say you didn't open your Athira until a little bit later in life, then then you'll owe income tax, but there won't be any penalty on the earnings that you withdraw. Whereas if you have reached that age of fifty nine and a half or older and your account is at least five years old.
Then go on, go ahead.
You can withdraw both earnings and contributions with no tax or penalty. That's where we all want to see ourselves at fifty nine and a half with an account that's more than five years old.
Then your gold then.
Yeah, so it is. The restrictions are are a little confusing. So if you want to do so, if you're younger than fifty nine and a half, and once you've hit that five that important five year window, then you avoid both taxes and penalties on earning when you're withdrawing that up to ten thousand to buy your first home when your withdraw is due to disability. So that's something none of us can see coming. That's another thing that this
can help with. And you'll avoid both taxes and penalties if the withdraw is made to a beneficial or your state after your death. So again, just another reason to get that five year time clock, you know, going, because there's a lot of reasons. Granted the taxes may not be a big deal to you, but if they are, then that's a reason to get that five year clock start.
Now.
I know we're not to the vulnerability round yet, but I will choose to start talking about this now. One of the things that I have faced. So I have a roth Ira. I I opened it four years ago and began investing in it three years ago, which is something that I have shared on the podcast before, which is a common mistake. So that's something to check if you're like, yeah, I do have a wrath Ira, but
I don't really know what's happening with it. You have to open it and then pick your investments and pick what you're invested in. That's something we cannot tell you. That is research you're going to have to do on your own, and I mean talk with trusted people. Sure, but figure out where you want to then invest your wroth Ira money. Now, for me, this is real talk.
Something I shared with John before we had record was I really want to be able to encourage people to do this six week wroth Ira challenge and invest as much as possible for the twenty twenty three year. But I recently looked at my wrath Ira and I have only made a little bit of money above and beyond what I have put in. So the money I've put in has not grown much, and so it feels a
little bit deflating to me. Of I want to be able to say, oh, I'm putting X amount of more money in this year, but at the same time that doesn't feel really great or comfortable for me because I am not seeing much growth. Now. In the back of my mind, I also know time in the markets better than timing the market. I do listen to you and that there are dips and ebbs and flows, and that this is going to happen, and don't be checking it
month to month. And I haven't been, Like here, I am checking it three years later only to find out my money's not growing that much, and yet my high yield savings account is.
I'm not saying I'm.
Just gonna invest for retirement in a highyield savings account, nor am I recommending that, but like it is a thought for me when ben Jen and I looked at it, and yeah, I have only made four point nine percent on my roth IRA investments and I'm making five point h five on my high yield savings account. That doesn't
feel great. And I got to imagine that depending on where some listeners are where you've started, if you began in twenty twenty one, twenty twenty two with an investment, you probably did see some dips and that doesn't feel great. So it's kind of difficult to get over some of that hump. And I think for me, I'm a natural skeptic.
I think a lot of us millennials are to be able to talk through all right, help me understand why this is still a good idea for me, Because I've been doing it for years, I'm not seeing what i'd want to be seeing. Now you helped me to find maybe some better investments that aren't going to be maybe a little not going to be as the lower risk. What's the word I'm looking for? But yeah, so tell the people what you told me out loud, jem.
Okay, Yeah, so I'm this is this is all like the advice that I will give is all safe to save because it's not financial advice. But so what the biggest criticism of a target date fund, if you're going to meet a critic of one, is that they become too conservative too fast, or that they just are too conservative. And what that means is that the ratio of stocks to bonds more mostly leans too heavily into bonds too quickly.
And so you should check your if you're in a target date fund, you should check your target date fund three year performance against an S and P five hundred or a total stock market and a bond kind of portfolio, or have somebody do that for you. That's where a
certified financial planner can come in helpful. So that is what I would recommend for someone to do is compare that and if you're happy with the growth, then you're fine, and if you're not happy, then you can Readjust one of the biggest barriers to people readjusting their portfolio is
maybe not having enough money in it. So one of the biggest criticisms of index funds is that many of the minimums to get in are too high, and so over the years fire people financial independence retire early, like Geeks have been very much into Vanguard and their index funds, and a lot of the higher rate the good ones have a three thousand dollars minimum to get into the target faiths. Target date funds only have one thousand dollars.
So one of the criticisms, like I am currently having four index funds, is just the barrier to entry that they offer. And so lately I have been preferring for in just in general, have been preferring fidelity and we're not paid by any brokerage or you know, have any ties to any of them, but have been preferring fidelity because a they have the zero expense ratio funds and you can get into those funds for like I think, like ten dollars is in minimize much more accessible. And
then also you can get ETFs. You can get these at Vanguard too, but ETFs can get you the same quality, same low expense ratio of these really quality index funds
for a dollar a minimum investment of a dollar. And so that's kind of where like I'm also leaning in now something that is in like my area of learning and interest and could be of interest to you out there potentially if these have been barriers in the past, to you, these can be alternatives that you might want to research and see if they can be the solution
to these barriers. Because not a lot of people talk about ETFs unless you're like in you know, pro finance talk or not even gosh, but ETFs are have always been this like very on par with index funds, right, So it's ETFs or index funds is something we always
kind of say in articles. But for some reason, and we've told you guys, most people are using index funds in their investing and that and I think probably a big reason of that now seeing the four O one K that most people are mostly using their four O one K for retirement, usually don't see ETFs in a four oh one K. So that's why there's a lot I feel like there's a lot more education on index funds, right, So that's what we just jump to. It's what's the
information that's readily available. But we all know ETFs are out there too, and they have the same exact You can get an S and P five hundred index fund. You can also get an SMP five hundred etf. They have the same funds. And I shares just came out with some target date et so now literally they are the same. But I am doing more research on ETFs because of that. Just lower barrier to entry.
Yeah, that's awesome.
I think this conversation for me, both on and off the MIC, has been super helpful in keep going kind of the maintenance but also tweaking along the way. I think I took it to heart too much of set it and forget it, which can be true.
I'm sure I would be fine if I had never looked at it again.
But it's still worth checking back in a few After a few years, are you still pleased with what's going on? Make minor educated informed tweaks to what's happening and know that, Yeah, you can withdraw on these things if you want to it's not in entirely this high risk type of retirement investing situation. And also so with the six week wroth
Ira challenge that you can put money. So right now I have automatic withdrawals coming out of my bank account to go towards my wroth Ira And so if you want to put more money towards twenty twenty three to be able to max it out again, you have until April fifteenth to be able to do that. You can go in and manually say put this towards twenty twenty three, or put it towards twenty twenty four. If you don't and you just have the automatic withdrawals, it's going to
go towards the year that you are investing it. But you can make that designation. So that's one of the things that we are advocating for, is put it towards twenty twenty three, make it count for last year. Be kind to yourself. And after having this talk with you, Jen, I'm back on the wagon. I was ready to pull it all out.
Yeah. Well, when you were describing me, it was like super disheartening and being like, oh my gosh, yeah, I can see and you're what you're saying it's like, yeah, that's not right, that's not what the market's been doing. And so it just took putting the fun that you had next to the total stock market fund to see like, yeah, what you're seeing is is right, but it's not great. So let's you know, let's reallocate, and.
You can do that when you're starting earlier, right, the earlier the better.
And this is another great thing about the challenge, So we're not just challenging you to invest. And it's a perfect time to getting off of the no spend January where you're going to put that money, but it's also the time to look into your investments. See what that We want to look at the three year history because twenty twenty two was horrible. Twenty twenty two was a real bad year for the market. Twenty twenty three was better. So we want to look at like a three three
year time horizon. I think is is going to give a more accurate picture and see, am I happy with my performance? Are my expectations a little devoid from reality? Is this what you know other funds are doing? Is what I want? Even a possibility? Do I want to switch? I can do that? Now you can exchange when we are investing extra we're buying. But if you want to exchange, you can do that and just kind of realitatea and so you feel good about your investments.
Do you know where I am never disappointed and let down, and I always feel good about this investment we made.
Well, we check back in on it several times a week.
Oh yeah, we do the bill of the we that's right, it's time for the best minute of your entire week.
Maybe a baby was born and his name is Williams. Maybe you've paid off your mortgage. Maybe your car died and you're happy to not have to pay that bill anymore.
Duck bills, Buffalo bills, Bill Clinton, this is the bill of the week.
Hi, I'm Serena from Oklahoma via Minnesota. Can hear the accent Probably a little bit. Anyways, I just listened to your Negotiating Bills episode and it inspired me. Because I am a naturally shy person. I don't like doing stuff like that, but I was inspired. So I went to
the thrip store. I was buying a couple other things, and there was this tea cup I had wanted for weeks that has a chip on it, and so I didn't really want to pay for it when I had a chip on it, so I brought it up and I was thinking, Okay, maybe I will if I can get it for a dollar, then I'll be happy. And so I said, hey, this has a chip on it, and she just interrupted me right there and was like, you can just have it, and I was like, oh,
thank you. So it worked out super great. I got the teacup for free, which is not what I was expecting, and I was very happy with the results of my foray into negotiating. So thanks.
Oh my gosh, yes, you don't know if you don't ask.
It sounds like the most adorable little teacup reminiscent of Beauty and the Beast with.
The little chip on it that you got for free.
And I love that you're describing this as your practice, your foray into negotiation, because it is these types of circumstances that can then help us to negotiate when the stakes are a little bit higher when it comes to our insurance bills or phone bills, internet bills, where there's maybe even a little bit more money to be shaved off. But well done doing it in person, because that's usually the place that we all have. The most issue is trying to negotiate face to face can feel a little
bit more daunting than over the phone. So if you can do that, Serena, you are well on your way.
To some negotiation power in the future.
And well done knowing that you deserve you deserve to negotiate. Sometimes I think that's a big bearer that we think, Oh, don't I don't deserve a discount on this, Like what have I done to earn this discount? And no, you have money. You are a customer, and they need you. They need you.
To give their stuff free. They need to offload something. I really the rest store needs stop.
Real good, Serena. But remember the people that you are giving your money to they need you. So true, you have the power.
If you're feeling inspired and you have a bill that you want to submit to us, if it has to do with entering into the world of negotiation, if it has to do with believing in the power that you have as a consumer or client, or if your name is Bill. We have yet to have a person named Bill themselves call us.
I think I would. I don't know what I'm gonna do.
If I would probably record your face. I think if we're not already recording.
It virul friendspodcast, dot com, slash bill, we're ready for you, and now it's time for.
Me.
So we've been, you know, vulnerable already, will continue to be vulnerable because I think that you're not missing any content or information on rath IRA's the world. The Internet's not devoid of that. It's real life experiences. It's real feelings about investing. It's real life situations and how to navigate them. That is what is missing in conversations about investing. And also, let's just tack another thing onto the challenge. Talk about it, Oh, talk about investing with people over
the next six weeks. You don't have to sound like a genius or certified financial planner. Just try it out. Talk about ask your friends like do you have a wrath Ira, do you have like what's in your four and one kid?
Do you know?
Let's take this challenge, take this opportunity to have more normal conversations about investing, because so many investing conversations about are like about bitcoin, you know, and we would love to normalize conversations about wroth Iras.
Yeah, I mean it's uncomfortable, but I gotta say after our conversation, I'm feeling more comfortable. I'm confident, and that's a really good outcome.
Absolutely. So our official question for the Lightning Round is how much are you going to contribute to your wroth Ira over the next six weeks? How are you going to do this challenge?
Ho So, because of the January No Spend challenge, I did have a little bit of extra money, and so I am going to commit to putting an extra one thousand dollars into my roth Ira for the year twenty twenty three.
Yes, I love that.
I wasn't. I can't say that I was gonna say that and it be true an hour ago, But now that you and I have talked about it, this is now going to be true.
I'm glad that we did talk about it because you wrote it down.
I did.
I wrote it down like, well, this is probably the thing to say, but I'm not loving what I'm seeing in my roth Ira right now.
Yeah, I'm really glad that we talked about it.
Yeah.
I hope if you're listening that you'll talk about it with your friends because they may be thinking, this is what I'm supposed to do, this is what I'm going to say I'm gonna do but in private, I'm actually I don't feel like I'm.
Going to do it.
That's so us. It's like so honest. So I'm glad. I'm glad we got that sort of what about you, Jen.
So me I.
So we have maxed out our roth Ira every year from twenty seventeen to twenty twenty two, and in last year we were on track and then Travis got a new job and took a pay cut, and the roth Ara was what got cut from the budget. Yeah, and we had already done it halfway, so it was was it sixty five hundred each six? It was a number I just had it auto invested and it was about like six fifty months and I went through the first half of the year. So we like half maxed for
twenty twenty three. And so we have the renovation that should be hopefully wrapping up by the summer. So we're going to decide in March once we've spent. By March, we will have spent ninety percent of the renovation costs and we'll see how much we'll have leftover. We'll also get another advance for our book, which I'm going to factor in, but that won't come till the summer, so we're not going to decide till March. I would love to put another three k in. I think we can
do that. It's so hard to budget around a renovation because costs never go down, they always go up, So it just depends on what the final numbers are. We're also happing to like because we're in a construction zone. Our tenant on the other side of our unit of our house is mad every day, and so we're gonna we're deeply discounting his rent.
And that's life.
Yeah, that Like, these are the things that you make your best plans and then you work and flex around it because these things happen.
Yeah, timelines don't work the way you want them to do, right.
So I am definitely going to make some additional contributions in March. I will have to get back with you on what those are. My goal is to do three thousand, Okay, that's my goal, so fifteen hundred in each And I hope everyone out there knows that if you're married filing jointly, whether one spouse has a job or not, whether you're both employed or just one is, both can have a wroth iray. So typically one of the stipulations to having a roth araa is you have to have earned income.
If you are married filing jointly, and you are a stay at home spouse, you are still entitled to a wrath array because you're connected to that, you're your The government views your work as valuable, valuable, valuable, and valid, valuable enough that you can have a wrath array, but not so much that they're really going to help you with your big else their childcare, maternity, none of that. But yeah, yeah, so there you go, There you go. But I wanted to leave with like one more thing,
maybe something. So compound interest to me is so inspiring, it's so confusing, it's mathing, it's I can't comprehend it, and maybe you can't either. But one of the general rules of compound interest is that theoretically your money doubles every ten years. So if you just put a dollar you bought a dollar with ets in your wrath ira and didn't do anything in ten years, that would be two dollars.
Ooh right whoo.
So if you look at whatever you have in your roth iray today and you did nothing else to it, that number would be double in ten years. Theoretically, not a hard and fast rule. It's a rule of thumb, and I did check it on a calculator. It's a little off because I think it accounts for compounding monthly when most accounts compound quarterly, but it's close enough. So
imagine that you have. If you want to be a millionaire in thirty years and you don't want to invest anything over thirty years, then you just have to get up to one hundred and twenty five thousand dollars in your wrath ira. So obviously that's going to take you some time. But once you get to one hundred and twenty five thousand dollars in your roth ira or across you and your partner's rath iray, multiple rathirays, then in ten years that'll double. It'll be two hundred and fifty thousand.
In ten years that will double, and it'll be half a million, and then in years twenty to thirty it will double and become a million.
Wow.
So instead of thinking about like, oh, a million dollars, there's a lot, it feels like I can't attain it, Like I'm not a millionaire. That's not who I am. I'm just a you know, middle class working I'm gonna be working till I die sorty person.
I did make that statement before we hoped on this episode. Maybe don't worry about me, jen, I'll just work.
Till I die.
Maybe you feel like that I do. And don't put your goal as the million mark. Let compound interests do that for you. Let the math that math and you can't comprehend. Let that math do that math for you. You focus on that first one hundred and twenty five thousand dollars. You focus on that because even as you're investing it, compound interest will even help you get there.
Yeah.
Right, You're not going to have to, you know, do all that on your own. Focus on that first one hundred and twenty five or even that first hundred if you want an even round number. Focus on that and getting there, and your money will work hard for you and it will get you the rest of the way.
So research it, talk about it, decide what your goal is going to be. You have till April fifteenth, twenty twenty three, four twenty twenty four, thank you to invest twenty twenty three.
What year are we in?
And you can be kind to yourself now and your future self later. Thanks for listening, everybody. Many of you already know we have a new US letter called the Friend Letter, but if you don't already get it, you should fru friendspodcast dot com. We send you an email three times a week with freebies you can take advantage of that week savings tips, life hacks to help you save money spend better. We want to give a shout out to a particular friend who sent us this sweet
email from said change nos Co. Thank you listener. I was not going that direction and pronunciation, so thanks, they said, thank you for the amazing free download. I have never been able to complete a full month of a no spend, No Spend challenge. I feel very encouraged and I'm excited to be doing this with y'all. Thank you for all.
That you do.
So in January we walked everyone through and ourselves through. Both Jen and I also did this a no Spend January, And when we do challenges like that, we will also often give away our own freebies. So we gave a thirty day No Spend Challenge workbook, and that's what they're talking about. But what we also do is we give a budget toolkit at the end of every month for the upcoming month. The last Friday of every month is
a budget toolkit. So if you're getting the friend letter, you're automatically going to get that what's going to be on sale that month, what are some of the things that you need to be putting into your spending plan. It's just a really great thing to have in your inbox. So forgo Friends podcast dot com.
Yes, people love the budget toolkit and Sage has kept she kept us updated. This was at the beginning of the challenge, kept us updated on her progress and Sage just good job. You did phenomenally. If you're wondering if you like reply to our emails or our direct messages on Instagram, like we're there, that's us. So it's mostly me actually I'm there, yeah, and.
Then Jen will send the messages on to me and then all draft a response sometimes scatterbrain.
Amazing.
Well, thanks for listening, everybody, get more from us Forogle friendspodcast dot com and you know, have a good six week challenge.
Happy Investing Frugal Friends is produced by Eric Sirianni.
What are you hoping to do in retirement? Jen?
What's this one million dollar compound interest result going to get you when you are beyond fifty nine and a half.
Probably a knee replacement, double knee replacement. I think that's what I'm looking at, a real, real good one.
Your knee is hurting already.
They always do, not always, but I do have just I think from ice skating. I just have bad knees, so running does not hurt them more. I it's just you know, usually like going to the bathroom or something, you.
Need a higher toilet.
I do need one of those toilets that they see the memes out of, like it just raises and goes down like one of those toppers, toilet topper, one of those.
Wow, so much to look forward to.
I'll probably get that in retirement too.
Wow.
Yeah, they'll probably be all sorts of new things for us in thirty years from now that I absolutely won't know how to use because I don't know how to use things now.
Yeah. I don't know. What are you gonna do in retirement? I don't know. If I want to know, I'm.
I'm probably still gonna be working.
That's what my mother in law's doing. She retired a few years ago. You went to a retirement party she works harder now than she ever has in her life.
I just learned something about my great grandmother, my grand mother's mother. My mom told me that she worked in a pickle factory until she was like ninety two years old.
Just put the cucumbers in the jar, you do something like that.
Yeah, I think she sliced pickles. She just she worked in the pickle factory. And that's my lineage, that's my heritage that I come from, and that feels right. I will probably working with fermented food of some sort. I'm already in my sourdough era, so just multiply that. Recognize where I came from. I got a Polish great grandmother who worked in the pickle factory until the.
Day she died. So there you have it.
Here's goals with that. Here's the problem with that. The more you ferment, the more you will preserve your own self, and the longer you will live, probably, and you will need more money to live that long. You'll live into your hundreds because you're preserved so well.
I'm so picked shot by pickling morphings.
I just can't stop with the fermentation.