So imagine you could go back to just before you got your first real job. Your expenses were low because you've been living off parents, pizza delivery, etc. Imagine you could stop yourself as you began that job and give yourself some financial advice. Here is the advice I would give myself:
If your employer offers a retirement plan, sign up to put away 15%. You won't miss it. If they don't offer one, plan to put this same 15% into a Roth IRA and reduce your Net Pay by this amount.
Expect to pay anywhere from 15-50% of your salary in taxes. Do this:
Approx tax liability = Federal tax bracket + state tax bracket + 10%
Now let's calculate your Net Pay:
Net Salary = Gross Salary * .85 * (1 - approx tax liability)
Monthly Net Pay = Net Salary / 12
This may seem a little depressing. Get over it. This is your annual salary for all intents and purposes.
Now let's make a budget:
Housing = Monthly Net Pay * .25
Other Needs = Monthly Net Pay * .25
Wants = Monthly Net Pay * .2
Savings = Monthly Net Pay * .3
Now you may be a bit overwhelmed by how "little" you have for expenses. It is around 45% of your gross pay. Get over it. You didn't even have this much money last month.
Think about it this way. If you are only spending 45% of your pay and saving 15%, you can retire in around 30 years without a problem. Ask your parents if they wish they could have retired before 55. They probably wish they could have.
In addition, you are saving 30% of your take home pay! You can pay down your student loans in a matter of months, not years. You can build a 3 month emergency fund in 7 months! You can save to buy a house or to pay cash for a nice car! Think about bragging to your friends that you did that!
It may be hard. You will have to fight the feeling that you need stuff to grow up. It's not true. Try this instead. Be a grown up and keep your house clean. It will impress your friends and family much more.
What do you wish you could have said to yourself upon getting your first real job.
Dream a Little Dream with Me
January 10th, 2011 at 10:28 pm
January 10th, 2011 at 10:44 pm 1294699488
January 10th, 2011 at 11:14 pm 1294701265
January 11th, 2011 at 12:37 am 1294706240
January 11th, 2011 at 01:07 am 1294708072
1. You don't NEED a two-bedroom apartment. Renting a room for a couple years and saving a large amount of money is worth more than having an apartment.
2. Give yourself a strict amount that you'll spend on the classroom each month, and stick to it. Maxing out your credit cards for teaching supplies is not smart! Half of the materials you buy will only be used once or twice.
3. Be very careful in what you say to one particular person. They will turn around and bite you in the back.
4. Check out the 4 Blocks program. It will save you years of searching.
January 11th, 2011 at 02:32 pm 1294756350