I got a lot of good advice growing up. I was lucky because I had a financial planner in the family, and I had a god circle of influence. I meet a lot of people now who just have no idea what they should be doing with their time and money to stay on track in the “real world”. So if I had to boil it down to ten things, here’s what I’d say:
1. Start a Roth IRA for retirement.
This is the best deal for young professionals. It is a retirement account that you essentially put cash into (i.e. you’ve already paid tax on it). This is great because it means the money grows tax-free and you also don’t have to pay tax when you take it out (unless you take it out early). It is nice to have your own account that you will always be putting money into, even if you are changing jobs. I went for a whole year without a 401(k), but I kept pumping money into my Roth IRA. Always remember the time value of money; the money you save in your 20s grows longer and faster. Don’t wait until you’re 30 to start saving. That’s just stupid. Even if it is just $100 per month, do it. If you want to see the payoff, check out this Roth IRA calculator: http://www.planningtips.com/cgi-bin/roth.pl
2. Buy a used car.
Cars are the worst investment you will ever make. New cars drop 30% in value as soon as you drive them off the lot. Unless you are making over $100,000 in salary, stick with used cars. You can get a quality, used vehicle for $10,000 to $12,000 range. I recommend checking consumer reports to find reliable used cars. Also, remember that you can get cool used cars. My first car was a 5 series BMW that I got for $11,000. I bought it with 90,000 miles and drove it to 200,000 miles.
3. Keep renting, for a while.
You may be tempted to buy a house or condo immediately because people tell you that renting is just “throwing money away”. It may be true that renting is not the best choice from a purely financial point-of-view, but you need to consider more than that. First, do you have any money for a down-payment or an urgent repair (what would you do if the roof needed replacing). Also, do you want to commit to something as long-term as a mortgage? Do you even want to be in this city five years from now? You’ve got to keep a house for at least two years if you don’t want to pay taxes on your gain, and you’ve got to pay fees to real estate folks. So a lot of the potential financial benefits magically dissappear when reality sets in.
4. Start a rainy-day fund.
As a rule of thumb, you should have enough in your savings account to pay all of your bills for three months. Have you seen those desperate people on TV who are in financial ruin? This happens to people who don’t have a rainy day fund. Most of them have high credit card debt and are literally living paycheck-to-paycheck. When the paychecks stop, they are in very serious trouble and it happens quickly. Late fees are insanely high and things go from bad to worse, fast. Don’t let this happen to you. Spend less, save more.
5. Maximize your employers contribution to your 401(k) at work.
Employers typically will offer a contribution to your retirement account as a form of compensation. This is a great deal for you. The trick is to find the maximum amount of money they will contribute. Usually they have a formula to make this confusing, but you should be able to figure it out. A common method is to match what you contribute, but only up to a set limit. So if you contribute $10,000 per year, they’ll match it with another $10,000. Or they’ll match up to 50% of some amount, so if you put in $20,000 they’ll put in $10,000. The key is to find the absolute max they will give you, and then do whatever it takes to get that amount. But do not do any more than that amount. You’d be better served (usually) by investing additional money in your Roth.
6. Keep living cheap.
Do you remember what it was like to live with no paycheck (or maybe a very small paycheck) in college? Well, those live-with-almost-no-money survival skills will quickly dissapear when you get your first real paycheck. I strongly urge you to remember those skills and keep using them. You don’t need that huge TV. Save that money in your rainy-day fund and buy the big TV next year. Don’t finance too much crap, like expensive furniture just because you can “afford” the monthly payment. If you don’t have a rainy-day fund, you can’t “afford” anything. Read the rest of this entry »
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1. Find a Co op...
You can buy organic food that is grown in your area. In cities they are called co ops, in small towns they are called farmers markets. If you must eat meat, buy meat that hasn't been tortured while being slaughtered. KFC drops live chickens in boiling water for 5 minutes before butchering.
2. Volunteer
Many people, especially cops and soldiers, like the words strength and leadership. You can be both strong and a leader by volunteering your spare time to help someone.
3. Support Real Candidates
Find local and state candidates that run their campaign on small individual contributions and support them. If we want to end the legalized bribery that is our system, this is how to do it.
4. Live in the right place...
Rent or buy as close as you can to work. Use the bus, the train or a bike to get to work as much as possible. Spend as little as you can supporting the evil oil industry and the insurance industry.
5. Defund bad corporations...
Corporations are not democracies, and in our current system they answer to almost no one. You can hold them accountable by not giving them money. Your dollars are votes.
6. Throw away your TV...
The mainstream media manufactures opinion and consent. They tell you what to believe and they even shape the way you think. Television skews our perceptions about choices and outcomes. Remove this open sewer from your living room.
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