Best Decision: Opening a Roth IRA at 22
I spent the summer after my second year of college working in California. It was my first job that paid over $10/hr, and having lived in dorms the past two years, I was still in the habit of eating disgustingly cheap food for my meals (more on that in a future post). Combine that with carpooling to work and living with roommates, and I had a nice chunk of change leftover from my paycheck. This was my first experience with having money to spare, so I had to figure out what to do with it.
There were plenty of things I could have used my money for: a new computer, a fun vacation, a bunch of strippers — the possibilities were endless. Instead, I happened to come across an article about the power of compounding interest. It showed that if you start saving early enough, then you could be a millionaire by retirement if you invest it in the right places. Financial independence (in the future) sounded like fun, so instead of that new computer, a fun vacation, and a room full of strippers, I blew a chunk of my money on a Roth IRA. Party on, dude!!!
Although it didn’t sound very exciting at the time, I still did it because I felt like it was a step in the direction I wanted to take financially. Everyone didn’t agree though. My dad told me that I should keep it in case I needed it in the near future, but I didn’t listen to him. I opened a Roth IRA anyway, and since then I’ve contributed what I could afford from the money I’ve earned with summer jobs.
Looking back now, my dad was partially right. I could have taken out smaller loans for grad school if I hadn’t invested my money in a Roth IRA. However, the returns from my Roth IRA will dwarf the interest I have to pay on my student loans in the long run, so I still think I made the right decision. I also think this is the best financial decision I’ve made so far.
Worst Decision: Private vs Public University
When I applied to college in high school, I was accepted at two private universities and one public university. The private universities were two of the most prestigious universities in the country, and it was hard for me not to accept one of those offers. The public university was also one of the best in the country, but I felt like I wouldn’t be accomplishing as much if I settled for that school. In the end, I made my decision based on a variety of factors — location, degrees offered, student body size, etc.
I ended up choosing one of the private universities, so obviously cost wasn’t my top priority. The cost of the private university was almost twice the amount I would have paid to go to the public university, and in hindsight, I’m absolutely positive I would have gotten just as good of an education at the public university. However, I don’t regret my decision to go a private university. It was a horrible decision from a financial point of view, but I wouldn’t trade my experiences for the money I would have saved.
As I mentioned before, there were many factors at play — the location of the private university was farther away from home, the student body was tiny compared to the public university, and the political climate of the city was the complete opposite of what I grew up around. These are all things I would have never experienced at the public university. It was worth the extra cost to experience these things.
Conclusion
If I’ve learned anything from my experiences so far, it’s that a good/bad financial decision doesn’t necessarily make it a good/bad decision overall. My worst financial decision resulted in some of the most memorable personal experiences of my life. My best financial decision is actually hurting me right now, but it’ll have huge returns in the long run. If anything, I’d say that money is a major driving force in our lives, but we shouldn’t let it become the only driving force.
What have been your best and worst financial decisions so far? What have you learned from them?
