After joining the workforce, I had an older coworker close to retirement age talking to me about finances. She said that her generation will be the last to receive social security benefits. By the time I retire, there will be no program in place to help me financially. That had me thinking about putting money away, so that I could live a carefree retirement.
With that in mind, I made a plan for myself to build up my saving account to have a rainy day fund in case anything happens. I made it a priority to pay myself first before anything else. However, when I put money into my savings I noticed that the rate of interest was so low that I would be only making a few cents a year. I decided to look at alternative ways of building wealth.
That is when I looked into the realm of investing and other related areas. With my job, I utilize the 401k plan to get the full company match and decided to opt for the Employee Stock Plan. Using these options at work essentially gives me free money from the company because I am getting more than I put in. Also, I started to look into the idea of compound interest and opened another retirement account, a Roth IRA. Basically, the retirement account with work is pre-tax while the Roth IRA is post-tax.
The Roth IRA means that the money is yours and you will not have to pay taxes on it later. It can accumulate compound interest, which means instead of the money being paid out, the initial amount put in will continue to grow and gain more interest. For example, if I had $10,000 that gained 5% interest in a year then it would be $10,500. After another year and additional 5% interest it would be $11,025. That is a gain of $1025! Now imagine how much that would be after 40 years?
I encourage you to spend some time learning about finances and different ways of earning income. The new American Dream is being financially independent, which takes a vast amount of dedication and learning about different trades.