Part of learning how to be an adult is how to deal with money. Some people’s parents handle their money for them for a long, long time. Some were on their own from an early age. No matter where you stand currently, part of learning how to take care of yourself and others is making sure you are at the very least, aware of where your money goes. Because money is power, and you should have all that.  Power and money. And awareness.

(Note: I am NOT a financial expert. At all. As always: Don’t always trust the internet. Internet people can be sneaky. Ask an actual expert for advice. This is just to get you thinking.)

I have friends (believe it or not!) that financially range from knowing what the Dow Jones industrial average is on a given day, and friends who don’t believe in putting their money in anything more complicated than a checking account because they think the world may end up collapsing soon so what’s the point?

I’m somewhere in the middle. I know I need to look towards the future and retirement because I’ve seen what happens when you aren’t well prepared and it’s terrifying.  I also know that the best time to start worrying about this stuff is while you are still young. And you know me – I like to get a good jump on my worrying.

Why start worrying about retirement now, when you aren’t even sure you actually have a career yet and haven’t done other adult things like buy a house or pay off your car, or … well, we’ll get to that other stuff. But the reason is a little something called compound interest. You can read more about it, but in short – how I understand it is that the more you save, the more interest piles up, and the only way to make any real, substantial, not-eating-cat food-when-you’re-80 way to do this is to start now. Even if it’s not big money.

The two most common ways I’ve heard of to save for retirement are Roth IRAs and 401(k)s.

A  401(k) is a retirement savings plan which allows you to save for retirement pre-tax. It comes right out of your paycheck, so you’ll never miss it.  The pre-tax means you are not paying tax on the money you are putting into this account yet. When you withdraw it, at retirement age, you will then have to pay tax on it. Depending on your tax bracket and estimated tax brackets at age of retirement, etc. this may not be ideal. BUT (and here’s the big but) some companies will match how much money you put in, to some degree. So, if you put in 8%, the company may “match” you 4%. This means they are putting 4% extra into this account for you. A match is FREE money. It’s like a raise. This is a very good thing. If your company offers a 401k match, you should absolutely contribute the most you can to get the most match possible.  401(k)’s are also kind of great because the money comes out of your paycheck before you even see it. This way, you can’t skip out on contributing and don’t even have to worry about it. Pretend it’s like all the other crazy taxes that get taken out. Sigh, shake your head and move on.

What if your company doesn’t contribute (or offer!) a 401(k)? Or, what if you’ve contributed all you can to get the match, but still have money left over to invest?

The answer is a Roth IRA. (ProTip: In real life, pronounce this as “I.R.A.” not “ira” like a throwaway Scrabble word.) Or, it may be a regular IRA, but I don’t know much about those since … I don’t make enough money to bother researching that.

The Roth is also a retirement account, but you contribute to it after you’ve already paid your taxes on it. So, after you get your paycheck – THEN you take your money and put it in this kind of account. Because this is an individual account and you have to set it up yourself, this takes a little more thinking and legwork. But once it’s all done, you can almost certainly set up automatic deductions and then forget about it for awhile again.

As you may have surmised, I love Suze Orman. And I can tell you about Roths no better than Suze can. I promise that this article is really, really readable.

What I Do

When my company offered a 401k match, I took advantage of it. I contributed the most I could to get the full match. I did that from the very first day, my first job out of school. This way I didn’t even realize the money was “missing.” I budgeted everything based on this lower “actual money in my checking account” amount.  My plan was to continue doing this and then when I got on my feet a little more financially, I would take any extra money and open up a Roth IRA and contribute there as well.

Well, life happens. My company stopped offering a match, I was hoping temporarily. I continued contributing, because I was avoiding the hassle of opening up a Roth IRA and I hoped the match would come back. It was confirmed that the match isn’t coming back any time in the immediate future, so this year I stopped contributing. The plan was to immediately open up a Roth IRA, but I decided to take this extra money and finally pay off my car (another post altogether). Once that happens, I’ll open up my Roth IRA. I’m giving myself a hard deadline of June 1st to make my first contribution towards my future, even if the car isn’t paid off.

I hope this helped a bit. I know I didn’t get into mutual funds and all that other nitty-gritty. Mainly because I’m still learning how to understand it all, but I also find that most people struggle with these two larger concepts, so I wanted to focus on that.

Interested in learning more? Here are some of my favorites.

• Suze Orman
• The Mint Blog
• The Motley Fool
• Get Rich Slowly
• Quizzle

Did I miss anything on these two basics? Do you have money advice of your own and want to share? Not only do I really, really welcome comments, I would love some guest posters who have a knack for explaining complicated concepts about money (investments, budgeting, etc.) Please leave a comment/email me.

Also accepted: Comments on how awesome the new Erica/Suze Orman picture is!