Below is an excerpt from The Collective, Poynter’s newsletter by journalists of color for journalists of color and our allies. Subscribe here to get it in your inbox the last Wednesday of every month.
Rule No. 1: It’s not what you make but what you save.
That’s what my parents always told me as a kid. My mother was a first-generation college graduate. She paid her own way, working and riding the bus to classes. She and my father were both first-generation African Americans living in the North, products of parents who had migrated from the South during the Great Migration. My mother had a great career as a senior systems analyst, and my father is a financial planner. Both of them majored in finance. So I grew up hearing about the stock market.
But starting out as a multimedia journalist making $18,500 trying to pay my own bills, it just seemed impossible to save. After all, by that time, I had lived abroad in Colombia as a Fulbright grantee and just really loved to shop and travel. I figured I’d save when I made decent money. Well, my idea of decent money kept getting higher and higher while my savings sat still.
Looking at the Edward Jones’ retirement savings calculator now, I realize if I had just put $1,800-$2,000 a year into my 401(k), beginning from when I started working full time at age 22 and kept it up, I would’ve had around a half a million dollars saved for retirement by age 62. That’s if my investments made an 8% rate of return. That $1,800 a year is equivalent to $150 a month.
The truth is I was hard-headed. And I hope to save you some heartache. My parents were in my ear encouraging me to save for retirement. But truth be told, they never broke it down like this. That’s why I wrote this article. I want to show you it is possible to save for retirement while still living a great life, even if you are starting out on a meager journalist’s salary.
One major way to save money is to wear your natural hair. If you are getting your hair straightened once a week at $65 a pop, that’s $260 a month you could be saving. So if you could find a way to cut back on hair appointments, that’s money you could be saving toward retirement. Or negotiate with your employer to get all of your hair expenses paid.
Also, you could cut back on the number of dresses you purchase. I remember when I started out working in TV news, I wanted to impress viewers by wearing a new outfit every day. But that wasn’t necessary. Save on clothes by negotiating for a clothing allowance and staying within that amount. Also, you can save by shopping at discount stores like Burlington and Ross, consignment shops or Goodwill in affluent neighborhoods, Dillard’s Clearance, Poshmark, Amazon or some of the clothing rental companies such as Rent the Runway, Stitch Fix and Le Tote.
The more you save on clothing and hair, the more you can afford to allocate to your 401(k). A good rule of thumb is to at least allocate the same percentage of your salary that the company is matching. For instance, if the company matches 6% of your salary, then allocate 6% of your salary to your 401(k). That translates to 6% of your salary going toward retirement and the company giving you an additional 6% to put toward your retirement. That company match was free money that I left on the table in my early days. Of course, in many cases the company match is offered only if you stay long enough to be what they consider vested.
It’s something to consider when climbing the ladder in the news industry. You should consider what you’ll do with your retirement portfolio when switching jobs. When I finally paid attention to my retirement account that I had rolled over into a Roth IRA and invested it, it doubled in value in four years.
Typically when you switch jobs, you have four courses of action with your 401(k). According to investment firm Edward Jones, you can keep the money in the former employer’s 401(k) plan if allowed, move the money to your new employer’s 401(k) plan, roll over the money into a traditional or Roth IRA, or cash out the 401(k) account and face tax consequences. Consult with a tax adviser and financial planner to decide which option is best for you.
The benefit of rolling over your 401(k) into a Roth IRA, according to financial advisers at Edward Jones, is you pay income taxon that money today when you might be at a lower tax bracket rather than when you withdraw the funds in retirement. However, you have to make sure you’re able to pay those taxes in the year that you perform the rollover.
Unlike the past when you had to pay a commission on each trade, it’s fairly easy to make automatic monthly investments into mutual funds, and trade using a brokerage account with no fees.
Some of the benefits of mutual funds, according to CNN Money, are they help to diversify your portfolio, come with professional money managers and often pay a capital gains distribution or payout, which is basically free money given to you at the end of the year for being a shareholder, according to advisers at Nationwide Insurance.
When I use the Fidelity or Robinhood apps, I can buy fractions of a share. That means I can take $5 and buy a slice of Apple or Tesla or whatever company I choose. All of those investments add up.
To select stocks to buy, I’ve recently started using the Yahoo Finance app. This app contains articles about companies to invest in, the 52-week high and low prices of a share of the stock and graphs with price history. Some stocks pay dividends, a portion of the company’s earnings given to you. Basically it’s free money distributed to you for being a shareholder.
Remember investing is a way of life. Make sure your money is working hard for you so you don’t have to work as hard.
The Collective is supported by the TEGNA Foundation.