One of the most amazing people I’ve ever met has chosen a path of volunteerism and social work for her life. She’s taken the gifts and talents God has given her and chosen to forsake several much more lucrative opportunities to participate in a social work program fraught with challenges that I wouldn’t face for all the money in the world. That she has the spiritual strength to spend her days helping those who cannot help themselves is amazing to me – but considering that it’s also going to be a strong financial challenge as well makes her choice all that more impressive.
Let’s see what we can do to offer her some useful financial advice – and also give similar advice to anyone else who may be choosing a path like this one. For starters, her income is going to be low with relatively minimal benefits for quite a while, and it’s likely that her exact position will change regularly over time. What can be done to ensure the most financial stability over the course of her life? Here are my suggestions – I’d love to hear more in the comments.
Build an emergency fund. In a field where jobs are often in flux due to changing fund situations, many people engaged in social work hop from job to job regularly and an emergency fund is often vital for bridging the gap. It’s simple – just put small amounts of money away in a savings account somewhere every single paycheck and then tap it when you really need it, like when you have to switch positions, your car dies, or something else disastrous.
Many volunteer workers know the benefits of doing this, but they go about it all wrong. They keep a nice hefty account in their hometown bank or in a local branch bank near where they do their volunteer work. A much better approach is to find a nice high-interest online savings account to conduct their business, provided of course that the volunteer has regular internet access. HSBC Direct is a reliable one and gives a 5.05% APY return with no minimum balance, which basically means if you have $5,000 you’d like to sock away before leaving on a twenty seven month stint in the Peace Corps, you’ll come back and find that it has earned $572 while you’ve been away.
Make a Roth IRA your friend. At some point as a social worker, you’re going to face old age and some form of retirement. You’re also a relatively low income worker who will need some flexibility in how much to contribute from time to time. A Roth IRA is a perfect retirement vehicle for anyone in this situation. In a nutshell, a Roth IRA allows anyone to contribute $4,000 a year ($5,000 a year starting in 2008) to a special individual retirement fund. What’s special about it? Once you’ve made the contribution (and you can remove your contribution at any time if you really need to), any investment growth on that contribution can be taken out tax free after you are 59 1/2 years old. No income taxes at all. Even better, once the money is in the Roth IRA, it can easily earn 10% a year, which means that $4,000 put in at age twenty five can build to $112,500 at age sixty. Contribute that amount every year and you’ll have $1.2 million in the account when you’re 60. Hold off retirement until you’re 70 and you’ll have $3.17 million in there.
How does one get started? Lots of investment houses offer Roth IRAs and make it quite easy to invest in them. I personally recommend Vanguard (http://www.vanguard.com) – their investment choices are all quite good and are based on very simple logic. I have almost every investment of my own through them.
Cultivate a strong network of friends and family. If you’re considering a life of social work and volunteer work, realize that you’re likely going to need support in various ways for a long time. Talk to friends and family and be sure that they will support you in this choice – not in a financial sense, but in a sense that they understand the choice you’re making and may be able to provide a couch or a guest bedroom on occasion.
On the other hand, if someone you know is considering making such a choice, offer such help to them. Make it clear that they’ll always have a bed and some meals in your home. They’re making a very difficult choice to do something that will make the world a better place – show how much you support their difficult choice.
Know how to live frugally. She was lucky in that her orientation gave substantial training in frugal living, but some social work situations do not. The first and best move is to know how to cook from yourself from staple foods – this is the simplest way around to save money. Also, check your ego at the door and be willing to shop at Goodwill and the Salvation Army and other places for clothes and other items. You can get pretty detailed with frugal living – search around The Simple Dollar or elsewhere online for all kinds of additional tips.
If you would like to help even more than giving advice in the comments, please consider giving a donation to an exceptionally worthy cause. The link goes to a page for the charity that she’s involved with which details the charity’s financial state, the work they do, and also gives a link that you can use to donate to the charity. If you have a few dollars to give, please do so – the charity is a 501(c)(3), which means that your contributions are tax deductible. If you’ve ever wanted to help out The Simple Dollar with a small donation, give to this charity instead – you’ll be helping out an amazing organization and a group of people that really need the help.