Personal Finance Ninja: A Blog on Saving, Investing, Retirement and Entrepreneurship

Entrepreneur Spotlight: NYC Cravings Food Truck – Giving Up Finance for Chicken

If there’s anything that I enjoy more than speaking to young people who are doing interesting things with their lives, it’s breaking bread with the person while doing it. A few weeks ago, I had lunch with one of my friends who started his own business and we did a short interview for Personal Finance Ninja.

The spotlight is on Thomas Yang, who with his sister, Diana Yang, and their close friend, Eric Yu, founded NYC Cravings, a mobile street food vendor (read “food truck”) based out of New York City. Cravings offer a bunch of Taiwanese-based dishes with its most popular dish being Taiwanese-style fried chicken over rice with pork sauce. Bonus points for selling the food out of truck.

Here's what Midtown Lunch said about NYC Cravings

“The one thing I like about the NYC Cravings Truck is that it’s a work in progress, but the fundamentals for success are all there [and] the food they’re serving is stand alone delicious.”
- “NYC Cravings Truck is Not Just Taiwanese Fried Chicken Anymore"

Video Interview with NYC Cravings

Notes on the video:
0:16 – What Cravings is
0:35 – Why Thomas decided to delay his career in Finance to start a business
2:35 – How Thomas tested the idea before committing any capital
3:20 – What the food truck industry is like
4:15 – How Cravings advertises and received a ton of traffic from one article
7:00 – Cravings gets named as a Rookie Finalist in the 2009 Vendy’s
7:40 – Is being an entrepreneur contagious?
8:37 – One piece of advice for budding entrepreneurs
9:39 – Bloopers

I really enjoy the food but what I like most about Cravings is their story. The truck was started by three friends in their very early twenties and they’ve been able to achieve a ton of success in a very short period of time through A LOT of hard work and a little bit of luck. Although the three partners are still involved in the daily operations of the truck, they’re at the point where they could easily become hands-off by hiring someone to operate the truck and move on to other things. Cash cow, anyone?

You guys can check out Cravings on Twitter and on Facebook | Cravings.

Video Details & Special Thanks

This video was shot with a Flip Ultra Camcorder (I love this thing - really cheap and easy to use) and cut with Adobe Premiere Pro.

Special thanks to Gary Li for joining us for lunch and working the camera.

If you're a young person with a business who would like to be featured on Personal Finance Ninja's Entrepreneur Spotlight, send us an email at ninja@personalfinanceninja.com

Life Style Inflation: Why Your Savings Is Not Growing as Fast as Your Income

If you’re like most people, you’re getting by just fine. You always have and you always will.

You don’t have a lot of debt and you’ve never really struggled with money but you’re not exactly rolling in the dough either. You’re making more money than you did five years ago but the problem is that your savings don’t seem to growing along with your income.

How come?

Why Your Spending is Out of Control

People (especially young people) tend to let their expenses grow out of control as they make more money. We eat at increasingly nicer restaurants and buy more and more luxurious goods as we can afford them. It’s called Life Style Inflation– the upward tendency of a person’s cost of living over time.

While Life Style Inflation isn’t a problem in and of itself, it can become an issue when there is too much of it.

Too much Life Style Inflation occurs when you have an increase in income with a proportionally larger increase in expenses.

Huh?

Well, that’s funny that you ‘Huh-ed?’ at me because I’ve got this handy dandy graph:

Notice how this person’s income increased from $60k to $100k (+67%) but his expenses have increased from $30k to $70k (+133%). Is this a problem? That’s completely up to you.

With there always being something that’s bigger, better, faster and shinier, it’s easy for expenses to spiral out of control as your income grows.

I’m sure a lot of you are wondering why it’s a problem with buying nicer things as you make more money. There isn’t. It’s important not to confuse Life Style Inflation with an improvement in your Quality of Life.

For example, a car can significantly improve someone’s Quality of Life. They are no longer at the mercy of public transportation and can commute at any hour of the day. However, someone who upgrades from a BMW 3-series to a BMW 7-series will not experience the same improvement in Quality of Life as the first person.

You may say that I just don’t understand how sexy a BMW 7-series is (I don’t) but I’ll pose this question to you: “when do you decide that you have enough?”

Decide now what kind of lifestyle you want to lead and stick to that plan. Don’t upgrade your lifestyle merely because you can – do it because you want to.

Just like monetary inflation, a little bit of Life Style Inflation is good. Good for the economy and good for yourself. As long as you’re making more money, your life style will naturally become more comfortable as you let yourself experience richer (in both senses of the word) things. Anybody can spend the extra money they make; as long as you’re making more money, growing expenses are inevitable no matter how hard you try to avoid it so focus your energy on keeping Life Style Inflation under control.

How To Pay Yourself First

When I first started working, I decided that I would try to sustain myself on my current salary and nothing more. All of my raises and bonuses have gone to my retirement accounts and savings account. Naturally, I spent some of it but for the most part, I don’t upgrade my life style as I make more money. I’m happy with the stuff I have right now.

For example, all of my raise in 2009 (it wasn’t much – I blame the recession) went to my 401(k); I simply raised my contribution amount. I never saw it and I don’t miss it.

Note: Have you decided at what point you'll have enough money? A house? A home in the South of France? 2 cars? Or are you just seeing how far you can get?

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This article was featured in the Carnival of Personal Finance #248 hosted by BeingFrugal.net. Please check out this carnival for many other great articles about personal finance.

Monthly Money Weigh-In March 2010: $32,193 (+$2,811)

How Much I Saved in March compared against my goals for 2010

Net Worth

February 1, 2010: $29,382
March 1, 2010: $32,193
Change: +$2,811 (+10%)

How Did I Do Against My Goals for 2010?

Goal for March 1, 2010: $31,653
Variance: + $540 (+ 1.7%)

Where My Money Went

$400 went to my Roth IRA
$732 went to my Roth 401(k)
$1,600 went to my savings account

Summary

If where my money went this month looks similar to last month it’s because I love automation! My savings is on auto pilot. I don’t have to think about meeting my savings goals every month because all the transfers happen by themselves. If you guys haven’t already automated your savings and investments, I strongly recommend it. If you have, let us know what you do and how you do it.

Also, if you guys recall from last month’s Monthly Weigh-In, I was looking for something to invest in. I moved some money to my Zecco.com account and was looking for something to invest in. I bought some individual stocks. Here’s the thing - I get physical pleasure from investing in stocks. It’s fun for me - I liken it to gambling and appropriately, I set aside a few thousand dollars a year as “play money”, which I let myself do speculate in anything with - individual stocks, options, short sell, Pokemon cards, whatever. I don’t confuse it with my long-term investing goals.

Question: Do you distinguish investing and speculation?

What are some goals that you met this month?

You Be The Expert!: When Numbers Lie - What's Wrong With This Ad?

Welcome to the first article in the You Be The Expert! series. At the end of every month, we'll post a question from either an awesome reader or one of our staff. The reader(s) with the best answer(s) will win a "prize", a term that we use loosely, and be forever immortalized in this post and crowned 'Ninja of the Month'.

This Month's Prize: 1 Red Envelope with Surprise Money

Given that the Chinese New Year was earlier this month, I am giving away one of the four red envelopes that I received this year.

Traditionally, these envelopes are filled with money and are given to the unmarried by the married. Whatever you are, I'm giving them to you!

I haven't opened any of the envelopes yet so I can't guarantee the contents. In the past, I've received anywhere from $1 to $100 with most envelopes holding $10-$20.

Good luck!

You Be The Expert!

You've heard the saying, "numbers don't lie" but is that always true? Statistics, in particular, are full of biases and can often be easily manipulated to support or reject a particular conclusion. See how one of our readers, Howard, and I both argued about index funds with statistics.

Anyway, on with the question!

What's wrong with the advertisement below, if anything? How is statistics used to present a biased presentation of factual data?

Winners will be selected at our next You Be The Expert! at the end of March.

If you have an idea for the You Be The Expert! series - an anonymous personal finance question, a quiz, a sudoku, whatever - send us an email at ninja@personalfinanceninja.com .

Note: If anyone from New York Life feels that we're using their advertisement inappropriately, please send us an email at mike@personalfinanceninja.com and we will remove it immediately.

Step by Step Directions on How to Get a Bank Fee or Charge Waived

It's true. I made a rookie mistake.

I wrote a check to my brother last month and when he cashed it, it brought my balance below my required minimum balance and I was hit with a $35 bank fee.

Bummer

I didn’t even know that I had a required minimum balance! So I did what any good personal finance ninja would do: I called my bank to get the fee waived. Here’s how the conversation went:

Customer Rep: Unfortunately, this is a fee that’s charged on all accounts whenever your daily balance falls under $100, which is the required minimum balance for your account.

Me: This has never happened to me before, would you please waive this fee? It won't happen again. [It never hurts to ask]

Customer Rep: I’m sorry. This is a type of fee that can’t be waived and is automatically charged on your account when the minimum daily balance is not met. [note the standard bullshit reason why the fee can’t be waived]

Me: Would you please direct me to someone who has the authority to waive this fee for me, like a manager? [Ask for a supervisor. No one wants to go to their boss for help with an annoying customer]

Customer Rep: I can direct you to my supervisor but he will tell you that this fee cannot be waived.

Me: That’s fine, would you please transfer me?

Customer Rep: Yes, just once second. Let me check something.

A few moments later...

Customer Rep: Okay, I will waive this fee this one time for you. Next time, we will not waive this fee. [Victory!]

Things You Don’t Want to Say

“Why Not?”

Me: Why can’t this fee be waived?
Customer Rep: The fee is automatically charged and therefore can’t be waived by us.
Me: Oh. Okay.

Asking “why” the fee can’t be waived won’t get you anywhere. They'll definitely have an answer and I guarantee that you won’t like it. Get into the business of denial:

“But athletes, especially cyclists, are in the business of denial. You deny all the aches and pains because you have to in order to finish the race. It’s a sport of self-abuse. You’re on your bike for the whole day, six and seven hours, in all kinds of weather and conditions, over cobblestones and gravel, in mud and wind and rain, and even hail, and you do not give into pain.”
- Lance Armstrong, “It’s Not About the Bike, My Journey Back To Life”

Completely deny the idea that the fee can’t be waived – because it can.

"I will close my account if you don’t waive this fee”

Before I get a million comments about why this is the best line to get anything you want, what I mean is you shouldn’t say this if you don’t mean it. It’s sneaky (cue ninja jokes) and can get you into a very uncomfortable situation where you’re forced to close your account when you don’t want to. Some better things to say are:

"I’ve really enjoyed the bank’s services up to now but I will really have to consider closing my account if I can’t this fee waived. What can you do for me?” Saying this raises the stakes by making a subtle threat about leaving the bank but also gives you the option of doing nothing if you choose to do so.
"Would you please transfer me to the retention department?” A company's retention department sole purpose is to “retain” you as a customer. Not every company has one but if they do, the retention department is much more likely to waive fees and offer concessions than a standard customer representative.

Step by step directions on how to get your own bank fees waived

I spent my Sunday afternoon putting together a step by step script for you guys to use to get your own bank fees waived.

I know it seems like I have no life but – well, yes.

You’ll need to view this in full screen by clicking the full screen button at the bottom of the embedded slide viewer:

How to Get a Bank Fee Waived

View more presentations from pfninja. You must view this in full screen

Pointers on Negotiation

Be assertive but also be polite. No one wants to help a jerk so don’t start yelling at the customer representative or threatening to close your account (unless you mean it). At the other end of the spectrum, don’t be a pushover either.
"No” is just a starting point in any negotiation. You’re going to hear “no” a lot if you’re negotiating but be assertive with your demands. Customer representatives are trained to deny your requests multiple times before they are allowed to waive a charge or fee.
Mention your value as a customer. Companies spend a lot of money on marketing and every customer has an acquisition cost. I guarantee that the fee that you’re trying to get waived is dwarfed by the amount of money the company spends on acquiring a new customer. Bring up the fact that you’re a long-term customer with large deposits and that you’re a nice kid. Believe me, the bank would hate to see you go.
Ask for a supervisor. No customer representative who cares about their job wants to pass a customer complaint along to a supervisor. If you actually get a supervisor on the line, just try the same things you tried with the customer representative: Ask for what you want. Mention your value as a customer. And be polite and assertive while doing it.

Note from Mike: What are some easy things to negotiate that I didn’t mention? What are some of the things that you were able to negotiate or get waived?

Assignment: If you received a bank charge in the last month or receive one in the future, use the embedded script and get it waived now! Tell us how it worked out (or didn’t work out).

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This article was mentioned in Time.com's money blog - It's Your Money, February 2010, "The Customer Service Confrontation: What to Say to Get Fees Waived"

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This article was featured in the Carnival of Personal Finance hosted by SimplyForties. Please check out this carnival for many other great articles about personal finance.

Automation: Why You Don't Have to Feel Bad About Spending Ever Again

Just because I write a personal finance blog, a lot of people think that I’m some kind of tightwad.

Well, that’s only half true.

I spend pretty recklessly. As long as I have money in my checking account, chances are that I’ll be spending all of it on the most frivolous crap.

Comic best viewed enlarged

Everyone knows that you’re supposed to “pay yourself first.”

But it just hurts so much to save. What if I need that money for something else later during the month? I just can’t bring myself to do it.

Here’s the trick: I don’t do it.

Well, I do. But I don’t actually do it. It’s automatic!

I have scheduled investments and automatic transfers set up for my Roth IRA, Roth 401(k) and online savings account. The day after I get paid (1st and 16th of every month) the following automatic transfers occur:

$500 to my online savings account
$366 to my Roth 401(k) and then my Roth 401(k) automatically buys into a small cap value mutual fund
$200 to my Roth IRA and then my Roth IRA automatically buys into a life cycle mutual fund

Before I even get to see any of this money, it’s already gone. It’s a psychological trick but you’ll be surprised at how well it works in changing your spending habit. If you can’t see all those little Benjamin Franklin’s screaming “spend me”, you won’t miss them.

Here are some reasons why I like automatic investments:

Automating your saving keeps you accountable to your goals. If you decide today that you’re going to save $300/month, I want you to go set up an automatic $300 a month transfer to your savings account right now. And don’t touch that dang money once it’s in there, either!
It’s free and it saves you time. It’s just plain convenient to automate investments. Instead of sweeping your money into your savings account or brokerage every month, just let your bank do it for you. It’s free and you don’t have to lift a finger.
Everything left over is “discretionary income”, i.e.: guilt-free spending. If you automate your investments, you’ll never have to feel bad about spending on anything again. You’ve already met your saving goals for the month and if you’re not getting yourself into debt with your reckless spending, you shouldn’t feel bad about any of it. Everything left over after your automatic investments are what you budgeted to spend anyway!

How to automate your savings

If you have a checking account and a savings account, you probably have the ability to automate your investments.

If you don’t have a savings account, I recommend the Automatic Savings Plan from ING DIRECT USA - High Yield Savings with the Orange Savings Account. I also like HSBC’s Online Savings Account a lot.

For your ING DIRECT USA - High Yield Savings with the Orange Savings Account, just click on the ‘Automatic Savings Plan’ icon and follow the directions.

For your HSBC Online Savings Account, just click on ‘Transfers’ and then ‘Scheduled Transfers’; follow the directions.

For all other savings accounts and brokerages, just look for an automatic or scheduled transfer/trasnaction.

If this is your first time automating your investments, here are some guidelines:

For the first month, start with a goal you know you’ll have no problem reaching. For example, I started out with $400/month to my savings account. With this amount, I wouldn’t have to worry about my checking account being overdrawn or that I would be starving during month.
Increase your monthly investments in iterations. At the end of my first month, I noticed I had over $1,000 left over in my checking account, so I increased the amount that was automatically invested by a couple of hundred dollars every month until I settled at an amount that was right for me. This was an amount where I didn’t feel too stretched in terms of my spending but felt a little pressure from the automatic savings.

You can do the same thing with your brokerage accounts, your Roth IRA, whatever.

Key Takeaways

Automatic investing is convenient
You won’t miss your money if you don’t see it
You’ll never feel bad about your spending again since you’ve already met your saving goals for the month
Start slow – automatically move smaller amounts to your savings account and move up in iterations to avoid overdraft fees, etc.
Don’t touch your money after you put it away in savings

Note from Mike: Automation is the single most important factor that I attribute my disciplined savings to. Do you guys already use scheduled transfers to save? What about scheduled investment transactions?

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This article was featured in Well-Heeled Blog's Run Round The Blogosphere 2/18/2010

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This article was featured in the Carnival of Personal Finance hosted by CreditCards.com. Please check out this carnival for many other great articles about personal finance.

Roth IRA’s: Why Twenty-Somethings Don't Have an Excuse for Retirement Investing

“I don’t want to put my money in a retirement account because if I need the money before I’m sixty years old, I’ll be screwed.”

Sound familiar? I’m going to show you why you don’t have to worry about having all of your money “locked up” in a retirement account.

First, I’m assuming you know why the Roth kicks butt and about all the money you’re losing if you don’t start early.

Second, let’s quickly talk about what makes a retirement account, well... a retirement account? Really, it’s just two things:

Tax savings. There are tax savings associated with almost all retirement accounts in the form of tax deductions now (your contributions aren’t taxed), tax break later (your withdrawals aren’t taxed), tax deferral (you don’t have to pay taxes on your earnings until you withdraw) or some combination of these. With the tax savings, you’ll end up with more money than you would in any other equivalent taxable investment.
Restriction on withdrawal. Most retirement accounts won’t let you withdraw any money until you’re at retirement age (59.5) without an early withdrawal penalty (usually 10%) and a tax bill if taxes would have been due at withdrawal.

The point is that tax savings are great but the restriction on withdrawal suck ass.

What if I told you that there was a retirement account that gives you all the tax saving benefits without any restriction on withdrawals?

If did I tell you that, I’d be lying BUT the Roth IRA comes pretty darn close. Here’s why:

Tax savings:

Roth IRA contributions are made after-tax but all withdrawals including earnings on your 30+ years of growth come out tax-free. Yes, you read that correctly - you don’t have to pay a penny in taxes on the thousands of dollars of earnings that you’ll get throughout the year.

Limited restriction on withdrawals:

Your contributions can be withdrawn tax-and-penalty-free at any time. Because of this, I like to think of my Roth IRA as my last-resort emergency fund.
$10,000 of your earnings can be withdrawn tax-and-penalty-free to buy your first house after your Roth IRA has been funded for 5 years.
Your earnings can be withdrawn tax-and-penalty-free to pay for qualified education expenses (tuition, books, supplies when enrolled in an accredited school) after your Roth IRA has been funded for 5 years.

Keep in mind that contributions and earnings are different. Example: I contributed $5,000 to my Roth IRA in 2009 and I earned $500 in interest, dividends and stock appreciation. The $5,000 is considered contributions, which I can withdraw at any time, and the $500 is considered earnings.

My focus on housing and education is because that’s what most twenty-somethings are concerned about. There are a bunch of other reasons why you can withdraw earnings from your Roth IRA without penalty. If you’re curious about any of the other reasons why you can withdraw your earnings early, read the IRS guidance if you dare or you can just try Investopedia.

Example:

Everything about Roth IRA’s: Why Twenty-Somethings Should Invest for Retirement

View more presentations from pfninja. This presentation is best viewed in full screen

Rules of the Roth IRA

For 2010, you can contribute up to $5,000 to all of your IRA accounts combined. If you make less than $5,000 this year, you can only contribute as much as you make.

Also, if you meet any of the below criteria, you might not be able to contribute the full amount to a Roth IRA and should do some research:

You make more than $114,000 and are single
You make more than $166,000 and are married, filing jointly
You make more than $100,000 and are married, filing separately
You don’t have a job – you can only make contributions if you have income for the year

If you make too much money to qualify for a full contribution to the Roth IRA, you can look into a Non-Deductible IRA but it’s probably not worth the hassle.

Note from Mike: Here’s some food for thought – your Roth account will always remain tax sheltered even if your income reaches the limits and you’re no longer allowed to make additional contributions to the Roth. If you plan on making a lot more money in the future, it’s a good idea to get as much money into tax shelters like the Roth IRA while you still can.

Key Takeaways

With a Roth IRA, you can withdraw your contributions tax and penalty-free at any time for any reason
You can also withdraw your earnings after five years tax and penalty-free for school or up to $10,000 for your first home purchase and some other reasons older people care about

Just because you can doesn't mean you should. Withdrawing contributions or earnings means that you'll be losing out on thousands of dollars of tax-free growth that you could be getting from your Roth

The easiest (and smartest) time to start taking distributions from your Roth IRA is at retirement age, after you turn 59.5("fifty-nine and a half." Weird, I know.)

What Now?

In one of our next articles, we’ll go over step by step directions on how to set up your Roth IRA account with Zecco.com and some of our other favorite brokerages.

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Updated on 2/12/2010

Two comments that were made on this article deserve a mention:

1. Christine W. mentioned to me privately that Traditional IRA's may be good for people who are currently working and know that they're going to graduate school 5 years later for two reasons:

You get a tax break now for contributions to a Traditional IRA
Assuming that you quit your job and have no income, when you make a qualified distribution for graduate school 5 years later, you will be at a lowest tax rate
You may not have to pay any taxes depending on how large your distributions are since any tax liability will be covered by the standard deduction

This was a really great point and I'm kind of disappointed that I didn't think of it first. With that being said, those who do this should tread carefully because if you're relying on this money to help you pay for school, it may be an issue that the money in a Traditional IRA cannot be withdrawn for any reason for 5 years without penalty.

2. Money Honey SF mentioned that "the Roth IRA or any IRA for that matter is more flexible than a company's retirement account. You can buy pretty much any type of assets or securities you want in there. With an employer's [401(k)] retirement account, you are limited to investing only in their choice of funds."

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This article was featured in the Carnival of Personal Finance hosted by Budgets are Sexy. Please check out this carnival for many other great articles about personal finance.

Roth 401(k) and Roth IRA's - Why the Roth Kicks Traditional Butt

If you already know the difference between a Roth 401k/IRA and a Traditional 401k/IRA, you’re in better shape than most of us (financial shape that is). There are so many choices out there for retirement investing; we often make the worst choice of them all: no choice!

Today is the day we change all of that and learn what the difference between a Roth and Traditional plan is. Here’s the short story: the Roth kicks ass and chances are if you’re young and have a long investment horizon, the Roth is better for you.

Keep in mind that this article contains information that applies to both the Roth IRA and Roth 401(k). There are a million (okay, about five) other reasons why a Roth IRA is better than a Traditional IRA which I'll write about next week.If you can't wait, you can read about them.

For those of you who need some more convincing, check out this embedded slideshow:

Why Roth Kicks Ass

View more presentations from pfninja. Best viewed in full screen

So to recap:

Traditional 401(k)/IRA are tax deferred plans.Contributions are made on a pre-tax basis, and taxes are paid on both the principal (your contributions) and earnings (capital appreciation on stocks, dividends, interest) when you make your withdrawals at retirement. With a Traditional plan, you take a tax-break now. For example, if you make $50,000 a year and contribute $5,000 to your Traditional IRA, you only pay income tax on $45,000 of your income.
Roth 401(k)/IRA plans are tax exempt. Contributions are made on an after-tax basis. That means that you pay income taxes on your contributions before you contribute them to your Roth plan. Then, when you make your withdrawals of principal and earnings at retirement, you don’t have to pay any taxes at all! Your after-tax contributions result in after-tax earnings, get it? You can’t escape taxes but if you pay them up-front and get them over with, you don’t have to worry about them again like you do with a traditional account where you pay taxes at withdrawal. With a Roth account, you’re effectively contributing more money than you are with a traditional account because each dollar is an after-tax dollar.
The Roth plan is awesome. The Traditional is good too.

I can hear the cynics now… “But Mike”

“I don’t expect to be in a higher tax bracket when I’m older.” Okay. Great point. A lot of people like pointing out that if the only difference between a Traditional and Roth plan is the timing of taxes then those who don’t plan to be in a higher tax bracket in the future should participate in a Traditional plan and take the tax break now. For the few of us that plan to make less money when we’re old (really?), it might make a little sense.

tax bracket

“What about the tax savings I get now from a Traditional 401(k)/IRA? That surely counts for something.” It’s true that you get a tax break now if you invest in a traditional account. It might even make sense to take the deduction now if you plan on being in a lower tax bracket when you get older. However, if your goal is to save more for the future, the tax break that you get now most likely won’t outweigh the tax-free growth that you can get by investing in a Roth account. In order to even get close to the terminal value of a Roth account after-taxes, a Traditional account investor must invest his tax savings from his initial tax deduction into something that can match the return of a Roth investment. Why not just invest in the Roth to begin with?

The truth is, the Traditional account isn’t a bad deal – the Roth is just better if your goal is saving for the long term.

Key Takeaways

I find that most people don't give a crap about any of this stuff and just want to which one is better? So, if any of these apply to you, you should probably invest with a Roth:

You plan on maxing out your 401(k)/IRA. Tax advantaged investment accounts are great - there's no question about that. You can get make more contributions with a Roth than a Traditional account since after-tax contributions are worth more. For example, a $5,000 Roth contribution is equivalent to a $6,667 Traditional contribution for someone in the 25% tax bracket. However, the 2010 contribution limit for IRA's are $5,000 so you can't even invest that much with a Traditional account.
You think you'll be in a higher tax bracket when you're 60. I don't know about you guys but I plan to be a baller shot caller (read: I plan to make a lot of money) when I'm 60 years old. Even if you don't plan on working when you're 60, if you're reading a personal finance blog at twenty-something, your assets will probably be generating the majority of your income when you're 60 and that might force you into a higher tax bracket.
You think income tax rates are going to go up. No one can predict the future. I can't tell you that tax rates are going to go up in 30 years. However, think about the two scenarios here:
First, tax rates can go up. It's going to hurt because your income will be taxed more. But if you invested using a Roth, your withdrawals will be tax free. Great move. The Roth worked as a good hedge for income tax rates.
The second scenario is that, tax rates go down or stay the same.Your Roth withdrawals will come out tax-free but you payed a higher tax rate on your contributions when you first invested them. On the other hand, your income will be taxed at a lower rate. So, you're covered and won't be hurting that bad.
You're indifferent. If you can afford to invest in a Roth account, you should. You're deferring your tax savings for the future and you get rewarded for that. Also, the IRA contribution limit is relatively low ($5,000 in 2010; $6,000 in 2011). Chances are you'll max it out sooner or later (see the first bullet point) so it's a good idea to get into the habit of investing in a Roth now.

I like the Roth a lot but both Traditional and Roth are good ways to save. The most important thing is to just get started, Roth or not.

Note from Mike: The Roth IRA, specifically, has a lot of other benefits which I'll write about soon. If you can't wait, you can read about them. Do you guys like the Roth? Why or why not?

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This article was featured in the Carnival of Personal Finance hosted by Len Penzo dot Com. Please check out this carnival for many other great articles about personal finance.

Monthly Money Weigh-In February 2010: $29,382 (+$3,719)

How much I saved in February compared to my goals for 2010

Net Worth

January 1, 2010: $26,203
February 1, 2010: $29,382
Change: +$3,719 (+12%)

How Did I Do Against my Goals for 2010?

Goal for February 1, 2010: $28,928
Variance: +$454 (+1.5%)

Where My Money Went

$400 went to my Roth IRA
$732 went to my Roth 401(k)
$1,600 went to my Zecco.com account

Summary

I’ve saved a little bit more than I originally planned for January but considering that I’ve been spending most of my nights working in the office, I don’t plan this extra savings to continue into the rest of the year when I’ll have the opportunity to go out and have a life.

Also, I moved some money to my brokerage account but I haven’t bought anything yet. What recommendations do you guys have?