Journalists love to complain about how poor they are. Along with the terrible working hours, it’s one of our chief complaints. However, just because you may be bringing in less cash than most of the people you cover doesn’t mean you should skimp on investing.
No matter how much money you have, setting aside at least a few dollars a month can help you build a solid portfolio to help you ride through the industry’s tough times. Tim Hanson, a senior analyst at The Motley Fool, offers some advice for making the most of your cash.
Open a 401(k) as soon as possible
Sure, you meant to open a 401(k) when you started your job, but you had plenty of other expenses. But procrastinating even a few years can cost you tens of thousands of dollars in the long run, Hanson said.
“The statistics are unbelievable,” he said. “If you invest $1 for 50 years at an interest rate of 10 percent, that $1 will turn into $150.”
That’s because of compound interest. The longer money has to accumulate compound interest, the quicker it will grow.
“If you did that for only 40 years, you’d get $45. That extra 10 years gets you from $45 to $150,” he said. “If you can only put away $1, you’ll be much better off 50 years from now.”
Meena Thiruvengadam, a business reporter at the San Antonio News-Express, opened a 401(k) a year after she was eligible. She acknowledged it was difficult at first.
“The hardest part was anticipating a smaller paycheck, and that brought out the procrastinator in me,” she said. “Once I committed to contributing a certain amount each pay period and did the paperwork, however, keeping it up has been easy.”
So remember: a few dollars today will be many more dollars decades from now.
“Time is much more important than what you’re investing,” Hanson said.
Don’t fear the stock market
As journalists, we read and report constantly on the struggling economy. The flow of bad news is enough to make many people shy away from the stock market. That’s exactly the wrong move, Hanson said.
“If you invest $1,000 and a couple months the stock market goes down, your brain tells you to pull out,” he said. “Don’t do it. The market over time goes up about 10 percent a year, so it’s just a matter of discipline.”
Hanson said to steer clear of quick decisions and instead look for solid companies with a positive income flow. He said stock in excellent, well-known companies can be purchased now for just a fraction of what they were going for even a year ago.
He also said to take advantage of index funds and money markets. Recommendations can be found at www.fool.com. If a stock takes a tumble, stay calm.
“Panicking is absolutely the worst thing you can do,” he said.
Get rid of credit card debt
Before investing in the stock market or opening an IRA, Hanson said, you should evaluate your credit card debt. If you are earning about 10 percent from the stock market but are paying 18 percent on a credit card, you’re losing money.
“Don’t invest at the expense of paying off your debt,” he said. “Consolidate if necessary, but you can’t do anything until you get out from underneath debt.”
He recommended examining and changing your spending habits if you’re struggling to make ends meet. Software programs can help you set a budget and see where you’re wasting money.
“Tracking your spending is one way to keep yourself from blowing cash on things that just aren’t worth it,” Thiruvengadam said.
Pay yourself first
If you don’t look out for yourself, who will? Set aside money for a 401(k) and a savings account from your paycheck before paying any bills. Get used to not even having that money available.
“I set up a separate savings account, and every time I get paid I deposit 10 percent into this account,” said Amy Green, an Orlando, Fla.-based freelancer for publications such as People and The New York Times. “That means if I get paid $100, I deposit $10 into this savings account. It’s like my tax withholding.”
Green said this separate account can come in handy for necessary work purchases and quarterly income taxes, preventing her from dipping into the family’s main savings account.
“This way I’m prepared to pay taxes every few months, and whatever is left in April I reinvest in my freelance business,” she said. “I’ve used this money to buy a printer, camera and go to journalism conferences. It’s a way to save without feeling like I’m missing much.”
Thiruvengadam sees her pay raises as opportunities to save, not spend more.
“I’ve essentially turned subsequent pay raises into additional 401(k) contributions. I never actually see the extra money in my check, but my investments grow and I can still survive on my own, thanks to that first pay increase,” she said.
Look for tax deductions
Be sure to fill out expense reports at work and save your receipts; even $10 a week can add up. Take a look at your income taxes and see if itemizing your work-related expenses would be better for you than taking the standard deduction. Talk to co-workers to see what they deduct for work and ask for advice come tax time, said Paige Ingram, a reporter for Colorado Community Newspapers.
“New laptop that you use for work? That counts. Internet connection and cable subscription so you can watch CNN and stay abreast on breaking news? Those count, too,” she said.
Rebecca Neal is a reporter for The Indianapolis Star. She can be reached at (317) 444-2805.
