“CHANGE YOUR LIFE TODAY. ACT NOW WITHOUT DELAY.” 1
By Noah Richardson
adulting
/əˈdəltiNG,ˈaˌdəltiNG/
noun INFORMAL
The practice of behaving in a way characteristic of a
responsible adult, especially the accomplishment of mundane
but necessary tasks.2
It can be scary moving out into the world on your own.
Though a cliché statement, there are many boring, yet
essential life skills public schools fail to teach. Such skills
may include how to pay your taxes, how to create a
budget, or how to go about buying your first home. Not
only is it uncommon for such things to be taught, but often
young adults don’t even realize they need to know these
skills until the skills are required of them!
One of the most important skills I believe should be
developed is how to financially prepare for retirement.
Unfortunately, this important skill is increasingly
unattractive, unexciting, and far off the younger you are.
The irony is the younger you prepare, the more attractive,
exciting and near retirement will become! There are a few
key steps in particular you can take to best set yourself up
for the future.
GET A CREDIT CARD
This suggestion may be controversial for some. Odds are at
some point you will want to get a loan and it will be near
impossible to get such a loan without a credit history. A
credit card is an excellent way to begin establishing credit.
The reason some may discourage getting a credit card is
the potential debt it may facilitate. While debt is a real
possibility, it is completely within your control. Many credit
cards are free and some even earn cashback on money
you would already be spending.
How it works
Very simply put, when you pay with a credit card, you
are having the credit company pay for whatever you are
buying. You then have to pay the credit company back
within a given time frame (usually once a month). If you
pay the company back within the timeframe, you pay
nothing extra. If you do not pay within the timeframe,
you will then have to pay back what you owe plus
interest. Pay what you owe when you are supposed to,
and you will never go into debt.
You may be thinking to yourself, “Why not avoid credit
cards all together and forgo the risk of debt?” The answer
is there are a number of unique advantages to paying with
a credit card.
BUILD
A credit card is perhaps the easiest way to begin
establishing credit. The vast majority of Americans apply
for a loan at some point in their lives, and odds are you
will too.3, 4 This may be to buy a home, to buy a car, or
even to cover expenses for some unforeseen
emergency. Again, a loan is nearly impossible to acquire
without a history of credit.
Protect
A credit card is a good shield against identity theft or
fraud. Frank Abagnale is a member of the Board of
Editors for Bank Fraud and IT Security and one of the
world’s most respected authorities on forgery and
cybercrime.5 Abagnale highly recommends using a credit
card to minimize liability as a consumer. He explains he
uses only credit cards (whenever possible) because they
are “the safest form of payment that exists on the face
of the earth,” removing “99.9% of…personal liability.”6 I
highly recommend watching his interview with Talks at
Google online.
Earn
Many credit cards have reward and cashback programs.
The Citi Double Cash Card, for example, earns you 2%
cash back (1% when you spend, 1% when you pay off).7
In 2018, the average spent through just debit cards and
checks was over $88,000 per American.3, 8 Had these
transactions been done with a credit card earning 2%
cash back, the United States could have saved nearly
$2,000 per citizen!
The longer you have a credit card (even if you don’t use it),
the stronger your credit score will be. If you have no
established credit, I recommend a secured credit card. A
secured credit card is a credit card you can get without any
credit history. The difference is, instead of borrowing
someone else’s money to make purchases, you first pay a
deposit and then can borrow up to that amount on your
credit card.9 For example, if you get a secured credit card
with a credit limit of $500, you will have to pay a $500 cash
deposit. After you have begun to establish credit (usually
after around two years) you can close the secured credit card.
You then will get your $500 deposit back, and graduate to a
traditional credit card, continuing to earn cashback and build
your credit score.
OPEN A ROTH IRA ACCOUNT
Einstein called compounding interest the eighth wonder of
the world, claiming “he who understands it earns it, and
he who doesn’t pays it.”10
taxed as much as 37%.12, 13 That means if you’ve earned
$1 million by retirement, you have to pay $370,000 in
taxes if you were not investing through a Roth IRA. That
is the equivalent of a modest house!
Weekly Savings for
Retirement
$100
WITHDRAW ANY TIME
$50
$0
20
25
30
START NOW
How much do you want to have saved by retirement?
The chart above shows how much you need to invest
(starting at the corresponding ages) on a regular basis to
have $1 million by age 65 (assuming an interest rate of
9%). Notice how just waiting until the age of 25 to start
investing instead of 20, the amount needed to invest
regularly jumps by about 60%! The rule of 72 (a
commonly accepted accounting rule) states that money
invested at an interest rate of 10% doubles every 7
years.11 That means starting at the age of 25 instead of
18 could be the difference between having $750,000
and $1.5 million by retirement age.
TAX FREE
Because all money contributed to a Roth IRA has already
been taxed, all earnings in a Roth IRA are tax exempt.
This very unique feature of a Roth IRA makes it
extremely advantageous. In an alternative account, such
as a 401K or a trading platform, all earnings would be
You can withdraw all contributions at any point without
penalty and without additional fees.11 This is another
unique advantage to a Roth IRA account. Because any
contributions can be withdrawn at any time, you would
be hard pressed to find a reason not to invest through a
Roth IRA account.
EDUCATE YOURSELF
Ultimately, the best thing you can invest in is yourself.
There are countless books, videos, seminars, podcasts, and
a great many other resources available to educate yourself
on not just finance, but a variety of topics. Similar to
finance, an education concerning mental health, physical
health, spirituality, creativity, communication, effective
learning, critical thinking and almost any other worthwhile
topic will pay out compounding dividends.
The sooner you sow, the sooner you reap. The earlier you
sow, the greater the harvest.
“The best way to predict your future is to create it.”
-Abraham Lincoln 14
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Notes
1
“Simone De Beauvoir Quotes.” BrainyQuote. Xplore. Accessed October 26, 2022.
https://www.brainyquote.com/quotes/simone_de_beauvoir_149611.
2
“Definition of Adulting.” Google search. Google. Accessed October 26, 2022.
https://www.google.com/search?q=adulting&sxsrf=ALiCzsZpOHbdJm93aRUeC3AlKBBPknDZQ%3A1666838251595&ei=65ZY8v_I7nk0PEP_uKV6AY&ved=0ahUKEwiLoYmvsP_6AhU5MjQIHX5xBW0Q4dUDCBA&uact=5&oq=adulting&gs_lcp
=Cgxnd3Mtd2l6LXNlcnAQAzIECCMQJzIECCMQJzIFCAAQgAQyDQgAEIAEEIcCELEDEBQyCAguEIAEENQCMgUIA
BCABDIFCC4QgAQyBQgAEIAEMgUIABCABDIFCAAQgAQ6BAgAEEc6CggAEEcQ1gQQsAM6BwgAELADEEM6DQ
gAEOQCENYEELADGAE6FQguEMcBENEDENQCEMgDELADEEMYAjoSCC4QxwEQ0QMQyAMQsAMQQxgCOg8IL
hDUAhDIAxCwAxBDGAJKBAhNGAFKBAhBGABKBAhGGAFQ_QVY_QVgAhoAXADeACAAYsBiAGLAZIBAzAuMZgBAKABAqABAcgBE8ABAdoBBggBEAEYCdoBBggCEAEYCA&sclient=gw
s-wiz-serp.
3
Bureau, US Census. “2018 National and State Population Estimates.” Census.gov, December 16, 2021.
https://www.census.gov/newsroom/press-kits/2018/pop-estimates-national-state.html.
4
“2021 FDIC National Survey of Unbanked and Underbanked Households.” FDIC, October 25, 2022.
https://www.fdic.gov/analysis/householdsurvey/index.html#:~:text=Altogether%2C%2072.5%20percent%20of%20households,nonbank%20personal%20loan)%20in%
20202.
5
“About Frank Abagnale.” About Frank W. Abagnale Jr. Accessed October 26, 2022. https://www.abagnale.com/About-FrankAbagnale-Jr.html.
6
“Ep1 - Frank Abagnale: Catch Me If You Can.” Talks at Google, August 1, 2018. https://talksatgoogle.libsyn.com/frank-abagnale.
7
“Citi Double Cash Card.” Online banking, mortgages, personal loans, investing. Accessed October 26, 2022.
https://www.citi.com/credit-cards/citi-double-cash-credit-card.
8
“Federal Reserve Payments Study (FRPS).” Board of governors of the Federal Reserve System, December 30, 2019.
https://www.federalreserve.gov/paymentsystems/2019-December-The-Federal-Reserve-Payments-Studyaccessible.htm#xfigure1-trendsinnoncashpaymentsbynu-aa8d124f.
9
McGuire, Virginia C. “What Is a Secured Credit Card?” NerdWallet, June 7, 2021. https://www.nerdwallet.com/article/creditcards/secured-credit-cards-vs-unsecured-difference.
10
Anderson, Dave. “The 8th Wonder of the World - Compounding Interest.” Prosperion Financial Advisors. Dave Anderson
https://prosperion.us/wp-content/uploads/2017/02/whitelogosized.png, July 12, 2018. https://prosperion.us/commentary/8thwonder-world-compoundinginterest/#:~:text=A%20quote%2C%20commonly%20attributed%20to,doesn't%20pays%20it.%E2%80%9D.
11
Banton, Caroline. “The Rule of 72: What It Is and How to Use It in Investing.” Investopedia. Investopedia, September 12, 2022.
https://www.investopedia.com/ask/answers/what-is-the-rule-72/.
12
Folger, Jean. “Roth IRA vs. 401(k): What's the Difference?” Investopedia. Investopedia, September 5, 2022.
https://www.investopedia.com/ask/answers/100314/whats-difference-between-401k-and-rothira.asp#:~:text=Contributions%20to%20a%20401(k)%20are%20tax%20deductible%20and%20reduce,at%20ordinary%20inco
me%20tax%20rates.
13
“IRS Provides Tax Inflation Adjustments for Tax Year 2022.” Internal Revenue Service, November 10, 2021.
https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2022.
14
Shah, Meet. “The Best Way to Predict Your Future Is to Create It.” SetQuotes. SetQuotes, November 5, 2017.
https://www.setquotes.com/the-best-way-to-predict-your-future/.
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