Editor: Crass Cash
I'll be on vacation this weekend visiting my cousins who have just graduated or getting ready to graduate from college. I ran across a yahoo.com article about just such a subject, but I'd like to edit it.
1. Don't make career decisions based only on dollar amounts.
You're in your 20's so spend this time exploring and finding out what you want to do in life. Take jobs that interest you, not just pay you more money. This is one of the last few times (unless you're me) where you'll be totally free from responsibility. No spouse, no kids, no pets, etc. Live life! Travel!
2. Know what your take-home pay is—it's not as much as you think.
It's time for you to start learning about taxes. What's the difference between the federal income withholding tax and payroll taxes? You need to know what all this is. FICA, Social Security, Medicare, etc.
3. Be realistic about your expenses and essentials.
Be conservative! This is a great life long lesson for everything. Over estimate your expenses and under estimate your income/revenues. This is important for your personal finances, investment analysis, and also if you decide to start a business.
4. Understand cash flow.
Find out not only exactly how much you'll be paid, but also precisely when, and when your bills will arrive
5. Keep an emergency account.
The standard is to keep 6 months of living expenses in an easily convertable cash account. This should be invested in a money market account, not stocks or bonds.
6. Get renter’s insurance.
7. Begin contributing immediately to a 401(k) plan or an IRA account.
“Even if you start off slow and modest, it will make a huge difference,” Morrison says. You may miss the $50 or so you put aside out of each paycheck, but it will grow and grow and save you from panic later.
8. Don't be afraid to invest.
You're young so if you're going to make a mistake now is the time since you will never have more of it than you do now. Put money into index funds like ETFs (Exchange Traded Funds) and do so for the rest of your life.
9. Keep living like you're in college.
The temptation when you get out of college and hopefully have a "high" paying job is to upgrade your lifestyle. Resist this temptation with all your might! We call this lifestyle inflation, where you're constantly spending more money as a result of you making more money. This is the most important time to be frugal.
10. Save AT LEAST 25% of your income.
This won't be as difficult as you think if you keep living like you did in college. Continue this for your whole life and you'll be retired by the time you're in your mid-50s. Which seems like a lifetime away, but it'll be there before you know it. If you can save half of your income you can retire by the time you're in your 40s. If you save around 70% of your income then you'll only have to work for about 10 years. Pay off all your debt first though.
11. Pay off debt in this order.
Credit cards, auto loan, student loans, and then start saving for a down payment on a home. You should be completely debt free (not counting your mortgage) by the time you're 30.
1. Don't make career decisions based only on dollar amounts.
You're in your 20's so spend this time exploring and finding out what you want to do in life. Take jobs that interest you, not just pay you more money. This is one of the last few times (unless you're me) where you'll be totally free from responsibility. No spouse, no kids, no pets, etc. Live life! Travel!
2. Know what your take-home pay is—it's not as much as you think.
It's time for you to start learning about taxes. What's the difference between the federal income withholding tax and payroll taxes? You need to know what all this is. FICA, Social Security, Medicare, etc.
3. Be realistic about your expenses and essentials.
Be conservative! This is a great life long lesson for everything. Over estimate your expenses and under estimate your income/revenues. This is important for your personal finances, investment analysis, and also if you decide to start a business.
4. Understand cash flow.
Find out not only exactly how much you'll be paid, but also precisely when, and when your bills will arrive
5. Keep an emergency account.
The standard is to keep 6 months of living expenses in an easily convertable cash account. This should be invested in a money market account, not stocks or bonds.
6. Get renter’s insurance.
7. Begin contributing immediately to a 401(k) plan or an IRA account.
“Even if you start off slow and modest, it will make a huge difference,” Morrison says. You may miss the $50 or so you put aside out of each paycheck, but it will grow and grow and save you from panic later.
8. Don't be afraid to invest.
You're young so if you're going to make a mistake now is the time since you will never have more of it than you do now. Put money into index funds like ETFs (Exchange Traded Funds) and do so for the rest of your life.
9. Keep living like you're in college.
The temptation when you get out of college and hopefully have a "high" paying job is to upgrade your lifestyle. Resist this temptation with all your might! We call this lifestyle inflation, where you're constantly spending more money as a result of you making more money. This is the most important time to be frugal.
10. Save AT LEAST 25% of your income.
This won't be as difficult as you think if you keep living like you did in college. Continue this for your whole life and you'll be retired by the time you're in your mid-50s. Which seems like a lifetime away, but it'll be there before you know it. If you can save half of your income you can retire by the time you're in your 40s. If you save around 70% of your income then you'll only have to work for about 10 years. Pay off all your debt first though.
11. Pay off debt in this order.
Credit cards, auto loan, student loans, and then start saving for a down payment on a home. You should be completely debt free (not counting your mortgage) by the time you're 30.
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