2015 was a pivotal year in my life. It was the year that I decided that I wanted to become wealthy. I wanted, still want, and am currently working on creating generational wealth. Wealth that changes my family tree. Proverbs 13:22 states “A good man leaves an inheritance to his children’s children”. That’s the type of wealth I will have.
I’ve been on a quest to grow mentally, spiritually, and emotionally since 2016. That’s when I started studying the Bible more. I also replaced listening to the latest Hip-hop albums with informative podcasts. I began listening to Dave Ramsey’s podcast where millions of Americans are getting out of debt. I started listening to Oprah Super Soul Sunday where people are transparent about their obstacles and how they overcome them. Then I filled my morning commutes listening to Suze Orman’s Women and Money podcast where she preaches about the importance of becoming financially independent.
During my quest for growth, I noticed a trend. Everyday people with average salaries ($50k per year) are building wealth and becoming millionaires by living below their means and investing into retirement funds. I realized I was doing neither! I’ve been a student for over 23 years, I didn’t have a career, and I loved to splurge on travel and designer clothing. It was a slap in the face and I felt behind. I knew I had to do something immediately to improve my financial health.
Although I decided that I wanted to become wealthy in 2015, I didn’t really take action until 2017 when I started an online e-commerce site. Then again in January 2019 when I decided to open a retirement account. Why the delay? The Transtheoretical Model developed by Detroit native Dr. Prochaska and Dr. DiClemente suggests that human beings go through more than six stages before they change a behavior: pre-contemplation, contemplation, determination, action, relapse, and maintenance. While this theoretical concept has been used in health promotion (cessation of smoking, exercise, safe sex practices) I believe it can be applied to behaviors such as how one handles their finances. I definitely went through the first four steps on the quest to improve my financial health. To be completely honest, I’ve relapsed a number of times during my journey as well.
One podcast episode, in particular, lit a fire inside of me and catapulted me into the action phase. Suze Orman spoke about the magical retirement accounts and index funds that are the Roth IRA and the S & P 500. Investing just $100 per month into a Roth IRA and Standard & Poor’s 500 index fund from the ages of 25-65 will result in 1 million dollars. Yes! You heard me correctly! Investing just $48,000 over the course of 40 years will result in 1 million dollars. How you might ask? From compound interest. If you invest $100 per month into a Roth IRA and the S&P 500 from the ages of 35-65 you’ll have approximately $300,000. Waiting ten years could cost you $700,000.
I’m not here to convince you that you should open a Roth IRA, I’m just here to drop the gems!!!!
What is a Roth IRA? A Roth IRA is a retirement account. Roth IRA’s are attractive for a number of reasons. With a Roth IRA, you make contributions with money on which you’ve already paid taxes. Therefore, you’re able to withdraw your contributions (not the earnings from compound interest) tax and penalty free at any time regardless of your age or how long your money has been in the account. The interest that’s earned cannot be withdrawn until you’re 59.5 years old. You must be 18 years or older to open a Roth IRA. There is no minimum amount of money needed to open an account. However, the maximum amount of money that can be invested into a Roth IRA is $6000 per year if you’re younger than 50 years and $7000 per year if you’re older than 50 years.
What is the S & P 500? The S & P 500 is short for the Standard & Poor's 500. The S & P 500 is an index fund comprised of the top 500 stocks in the marketplace. It’s often used as a measure of the health of the stock market. It is essentially the top 500 stocks bundled into one. Many financial institutions will have something similar to the S & P 500. For example, my Roth IRA is with Fidelity. I invest the money from my Roth IRA into the Fidelity 500 index fund which mimics the S & P 500. Click here to see how well the Fidelity 500 index fund has performed against the S & P 500 in previous years.
It’s exceedingly important to invest the money from your Roth IRA into the S&P 500 or similar index fund ,such as the Fidelity 500 index fund, for your money to grow. The stock market will increase and decrease. Regardless if the stock market goes up or down, don’t touch your money. Sit back and let it grow!
Everyone doesn’t qualify for a Roth IRA. If you earn over $135k per year of adjusted gross income ($199k if married and filing jointly) you no longer qualify for a Roth IRA. Fortunately, there is a back door. If you make more, put your money into a non-deductible IRA and convert it to a Roth IRA. If you’re an entrepreneur who makes over 135k, you can invest your money into a SEP IRA and convert it to a Roth IRA. Make sure you consult with your CPA before you make this switch.
While this type of investing won’t allow me to purchase my home in cash by age 33, it’s a way to build security for retirement. Would you believe me if I said social security will probably be non-existent by the time us millennials retire? We have to take care of ourselves. Imagine being able to gift a million dollars to your grandchildren from your Roth IRA tax-free.
I highly encourage you to listen to the following podcast and follow the following Instagram account to learn about the importance of investing in Roth IRA’s and index funds to become wealthy.
Oprah Super Soul Conversations podcast: Suze Orman at the Apollo: Women and Money, Parts 1 and 2. Suze starts speaking about the Roth IRA at the 40-minute mark on Part 1. I encourage you to listen to the ENTIRE podcast
Follow this Instagram Account:
@Personalfinanceclub
Want to jump in head first as I did?
Go to Fidelity.com
Open Roth IRA
Add a bank account to invest money (set up monthly recurring payments)
Invest that money into the Fidelity 500 index fund (set up monthly recurring purchases of the Fidelity 500 index fund)
Fidelity’s customer service representatives are awesome! Call them if you have any questions.
You're never too young or too old to be smart about your future and finances.
@myeedah , @harmonlakia , @smiley2k2, it’s never too late to start investing into a Roth IRA and S & P 500. I suggest you add more money per month . $250 if you can , $400 is even better . The maximum amount to contribute to your Roth IRA each year is $6000. However , if you contributed $100 per month that would be fine too. It’s whatever you feel most comfortable with . Yes @harmonlakia , tell the representative that you want to invest the money from your Roth IRA into the Fidelity 500 index fund .
So as the money goes into the Roth IRS, fidelity will transfer it to S&P 500 index fund? For those that are 35 how much should we invest since we lost 10 years?
Do we mention to the Fidelity representative that we would like to invest the funds from the Roth IRA into the Fidelity 500 Index Fund?
Also I have the same question above, about suggestions for those who are 35😩?
What are some of the things those of us who are in the 35 age bracket can do 🤦🏾♀️