My Personal Story: Background, Taxes, First IRA

Posted by Madison on November 19, 2007

To help you understand where I come from and my point of view, I thought it would be helpful if you learned more about me. My introduction to money, working, taxes, and retirement accounts has all influenced where we are today and how I handle money.

Growing Up

I grew up in a family of four in a suburban Midwestern town. My parents both worked, my mom as an accountant and my dad as a small business owner. I got an allowance and was encouraged to save my money. My parents never had any debt, except a mortgage which they paid off early.

Family Business

One of the best parts of being in a house that has its own business is that you get “hired” to do a lot of work…. and you learn a lot. I can remember licking stamps and mailing invoices in grade school. That turned into more as I got older, answering phones, helping with the books, etc. My first introduction to spreadsheets was having to enter my dad’s sales, which he kept manually in a ledger book, into the computer so my mom could complete the monthly and quarterly reports. Saturday morning at my house usually consisted of billing the customers and entering and depositing all the checks from the week.

Introduction to Stocks

My little brother was actually the first one to purchase stock on his own. He learned about it at school in fourth grade; my mom helped him buy Disney. At the time I was in seventh grade and more interested in depositing my money into a savings account, because it earned interest. I preferred to watch it grow as I added to it. And to be honest, I didn’t *quite* understand how his shares worked. I did, however, watch him diligently check the newspaper to see how his stock was doing.

A couple years later he announced how much money his Disney stock was now worth (up about 33% from when he bought it). I pulled out my passbook for my savings account and was shocked. He had earned a considerable amount more than I had, but I had worked much harder for my money. All he had to do was look at the newspaper (and later I found out, he didn’t even have to do that part!)

At that point I realized I needed to figure out how to do a better job making my money work for me. I spent time researching and determined that a mutual fund, not a stock, was a better investment for me. I read an article about a fund manager, where they included a picture of his dog. I was sold. Anyone who had a dog, must in fact know what they were doing with picking stocks, right? I purchased my first mutual fund from the Montag and Caldwell family.

Working and Taxes

I got my first job outside the family business at 16 working at JCPenney. Before picking up my first paycheck, I calculated how many hours I worked and how much my check would be. You can imagine my disappointment when I got my check and there were taxes withheld! In addition, they didn’t pay me for the work the week leading up to my check. Of course my dad has always paid me for all work done through payday. My mom explained how tax withholding worked, and after checking around with my friends (who we always assume to be the experts), yes everyone had money withheld, but we would “get it back” at tax time. Then she explained the payroll process where payday is somewhat behind.

My mom, since she is an accountant, always completed my taxes. At tax time (after consulting with the “expert” friends again) I was prepared for a refund. After all, one friend said his sister bought a Nintendo, or something like that with her refund. Would I get that much? Maybe more? There was so much anticipation…. my mom then informed me that I owed money. What? That couldn’t possibly be, everyone else was getting money!

Turns out, I had investments in my name that I didn’t know about. My parents were saving for my college education using mutual funds that were throwing off capital gains left and right. Again I was mad. How could my hard-earned money that I made be used to pay tax on an investment that I didn’t know about or have access to? Although, looking back, I am thankful that my parents chose to save for my college education; we are doing the same for our children.

My first IRA

My mom came up with a solution to avoid paying the tax. I could open an IRA, deposit my money there and “skip out” on the tax. Brilliant! I was sold. Later, I was able to convert it to a Roth IRA when it was first available. I think this was the first time that I learned that talking to my friends about money was not getting me anywhere. It was clear that my mom really was the expert and she knew a lot about money.

Luckily, I was exposed to stocks, taxes and retirement accounts at an early age. It has give me one of the most powerful advantages with money: starting young. I realize that many people aren’t given such a great opportunity. It’s one of the reasons that I am so interested in helping educate others in personal finance.

As I was finishing this story up, Moolanomy had a timely article for me to share my story in: Giveaway: Share Your Investing Story for a Chance to Win a Book. Here’s hoping I win!

You can get my latest articles full of valuable tips and other information delivered directly to your email for free simply by entering your email address below. Your address will never be sold or used for spam and you can unsubscribe at any time.


Comments to My Personal Story: Background, Taxes, First IRA

  1. Great story. You’re lucky you have a really financially savvy mom. My mom is a really good seamstress, but I don’t sew. 🙂


  2. what an inspiring story! It was so good I stumbled it!

    Living Off Dividends

  3. I love your personal money story, you had lots of good exposure to handling money from a young age. Thanks for sharing, Madison!

    Mrs. Accountability

  4. This article made me cry.
    I arrived on your site for the first time today, intrigued by a link from One Cavemans Journey, which I saw for the first time today as well. My point being that I stumbled across your post “I Quit” and was astounded to read that you are able to be a stay at home mom. “How old can she possibly be?” I thought. And then I read your little bio… and then came here to this article; back to my point: you made me cry.
    I am soon to be 36 years old, a child of a family full of people who are intelligent and physically capable but who were never taught about money. I have suspected up until now that there are things that “other people” …”rich people” know, that I don’t know. I’ve had vague, unsettling thoughts that there are “secret things” taught in wealthy families that weren’t taught in mine. What I do know is that my dad worked until his body fell apart… and my 70 year old mother is working like a dog to barely “make ends meet,” has no savings, and will retire on social security only with the balance of a 30-year mortgage on a house she’s only lived in for nine years. Myself and two of my siblings are in even worse financial situations of varying degrees and circumstances: Good credit but astounding amounts of debt and zero savings (me and my sister) and trashed credit, no debt, renting, no savings, no prospects (one brother). My other brother lives a middle class life in a middle class town in middle america with a middling amount of debt, and a decent income with what I assume is an “average” retirement savings. I’ve always wanted to know someone who “KNEW THINGS” about money… so I could ask about the BIG SECRETS in life…
    …but this is it? This is all it would have taken to change the lives of my entire family? It’s a great post… I’m happy for you… I hope I can learn these things so I can teach my kids. Maybe that’s how I’ll be able to survive my retirement without living in a cardboard box!


  5. As one writer to another your story is well written, good job! Keep it up. (I assume your parents showed you my book that I wrote)

    Ken B.

  6. I find it disappointing that you do not provide data. About how much were you making at each job? How much had you accumulated when you decided it was enough? Why is discussion of dollar amounts so taboo in our culture? People feel like telling others how much they make is like showing them their underwear!


  7. @ Melissa: Thanks for such sharing you story. I truly hope you will be able to teach your kids too!

    @ Mick: Here’s an article that provides some more insight into the numbers: My New Retirement Lifestyle Cash Flow. Hopefully that helps.


  8. Great Article.

    I definitely will introduce it to my daughter.

    Thank you for your great example



Previous article: «
Next article: »