25/01/2016 – 7 coses que els joves haurien de fer amb els seus diners (des d’una perspectiva jove i singularment cavallerosa)
El temps està de la teva banda, així que és millor que comencis a aprofitar-lo.
I begin this post with full disclosure: I work at a financial services company called The Motley Fool (great company) as a Web data analyst. Although I work in the financial services industry, this post is in no way associated with my job, and I am not currently — nor have I ever been — in a certified position to give financial advice. I am just a college-educated guy under 30 with little to no debt, a few bucks in the bank, some experience running a business, and an average credit score above 800 (still working on that every day). So there’s my affiliation, my qualifications (or lack thereof), and my sort-of-validation of my perspective. Disclosure over.
Oh, what a world we live in…
According to The Wall Street Journal, “The average class of 2015 graduate with student-loan debt will have to pay back a little more than $35,000.”
At the same time, Money magazine states that “Students who graduated from college in the class of 2014 earned median starting salaries of $45,478, according to a new report from the National Association of Colleges and Employers.”
Last little tidbit to sweeten the pot: The Atlantic published an article recently that declares, in its title, that “Most People in the World Have No Idea How to Manage Their Money.”
Most people just don’t learn sound financial advice at home or at school as they grow up, and that leaves life to be their teacher. If you’re a typical young person these days, then you’re probably going to graduate some level of higher education with a bit of debt and start making a modest starting salary (if you manage to get hired).
In that case, I would like to share seven things with you that life has been kind enough to teach me. I promise to speak only of what I know, so you’re going to get the “young, single gent” perspective.
STEP 1: Open two basic bank accounts.
Taking this back to the basics, you’ll want to open a checking and savings account. I won’t try to tell you where to open those accounts or anything, but I would suggest that you open them at a bank with some national presence. Find a place that you can count on finding in a few states you may visit so that you aren’t worrying about paying a bunch of extra ATM fees if you use non-[Your Bank] machines to get cash every now and then.
Think of these accounts as serving two purposes: operating and reserves.
You want to use your checking account as your base of operations. Your bills, fun purchases, day-to-day living — that all comes out of your checking account. The savings account is where you want to learn not to live off of your entire paycheck. Challenge yourself to put 3%-10% of your take-home pay into your savings account (whatever you can swing — just get into the practice of squirreling away something). You can save this money for any number of purposes, but at the very least you should stash enough money to cover a few months’ worth of expenses in case the fudge hits the fan.
Your bank accounts hold easily accessible cash for you to live on and fall back on in an emergency. These accounts are not for your retirement savings. We’ll get to that in STEP 6, but for now…
STEP 2: Create a budget.
Now that you’re making a little bit of money, it may be worth your time to understand what’s flowing in and out of your pockets. You can use sites/apps like Mint.com to help you out with this one, or you can just go old-school like me and create your own budget in Excel. Whatever flavor you choose, just do it.
If you’re romantically involved with anyone, count that person in your budget. Make your girlfriend or boyfriend a line item in your budget, because if you’re spending on them and maintaining that behavior, they’re really another bill (that you love and care for) when it comes down to it. I leave it to your discretion whether or not you tell them they’re a line item in your awesome new budget.
Leave yourself a little wiggle room in your budget, too. Do not plan it so tightly that you can’t take care of any unexpected expenses. Life is full of surprises, after all.
STEP 3: Begin establishing a line or two of credit if you haven’t already.
Some people will tell you to avoid things like credit cards or new car purchases at an early age, but I started young. I didn’t splurge on anything, I’ve never missed a payment on anything, and I learned great financial discipline.
Research what types of credit card offers are out there (seriously — some have cool perks), and get the one that best suits your needs. In the event that this is your first card, start with a small balance. Even if you’re offered some staggering amount, request something in the realm of a $1,000-$2,000 limit.
You don’t need to open a lot of lines of credit or anything; just start with one. I had one credit card for about eight years, and I just recently broke off into two cards. I simply split the credit limit of my long-standing card between the two cards.
From there, try to keep your spending threshold on the card somewhere between 30%-50% of your total limit. Credit companies try to give you balances that are intentionally beyond what your spending habits actually require. If you get too close to your credit limit — say you’re at $1,750 in debt on a card with a $2,000 limit — then it may negatively impact your credit score with any of the three major credit-reporting agencies.
If you do anything like purchase a car or a home, then never miss a payment. In your budget, make things like that a priority and pay them first.
STEP 4: If your job offers a 401(k), put money into it!
I will touch more on retirement-focused accounts in STEP 6 below, but I wanted to mention this one beforehand because it’s worth its own special call-out.
If your job has a 401(k) retirement plan set up for their employees, and they offer any kind of match on your deposits into that account, do it — and max out your match!
Say you make a $50,000 salary (we’re keeping the numbers simple) and your employer will pitch in a 50% match on up to 10% of your salary.
Max. Out. That. Match.
If you put $5,000 of your money (10% of your salary) into that 401(k) account each year, and then your employer puts in $2,500 (the 50% match), then you’ve just increased your deposit by half. That’s free money from your employer just for making smart decisions. Not only will you be saving 50% more, but your gains will compound WAY faster over time — because the more you invest, the more you can earn. That means you’ll have a lot more money down the road when you retire.
STEP 5: Increase your financial literacy. Learn. Learn. Learn.
Knowledge is power.
As I pointed out at the beginning of this article, most people don’t know much about money, so try to give yourself a leg up in the world and learn a little bit in your spare time (of your own free will).
There are tons of materials out there that can help you learn, but one book I always recommend is Nancy Dunnan’s (now classic) book How to Invest $50-$5,000: The Small Investor’s Step-By-Step Plan for Low-Risk Investing in Today’s Economy. It is very well written, and it tells you actionable things that you can really do with your money starting from modest means.
You can watch shows about money management on TV and read publications like the aforementioned Money magazine. Crap, watch videos on YouTube (from credible sources) for all I care. Just learn however you can.
And again, I am not a financial advisor — but you may be pleasantly surprised by what you can learn about money from a person whose job is all about money. When you start getting offers from your bank to speak to an advisor about your financial goals, take them up on it.
But before you have a conversation with this person, read STEP 6 below.
STEP 6: Open one to three “beyond basic” accounts focused on your retirement.
I put this one after STEP 5 above because I would encourage you to ask a financial professional about these things first. That said, you’ll want to remember these types of accounts:
IRA (Roth or traditional)
Whether you open one or all three of these accounts, the main focus here is to begin thinking of your retirement. Your savings account from STEP 1 just isn’t for long-term retirement planning. You can get much better returns on your deposits from any of these accounts.
Research each of these account types and pick that financial professional’s brain about their benefits, drawbacks, and tax implications.
If you want a good primer on investing, my job just released a cool little free guidebook for beginning investors to check out.
STEP 7: Try to make a few more bucks with your money.
If you have a bit of spare cash left, or you successfully manage to put a little aside, think about taking a few calculated risks with your money that will make more money for you.
Try starting a low-cost small business (or shoot for the stars if you want and go big). Sink or swim, you’ll learn something and be able to write things off at tax time. Buy some type of equipment and then rent it out to people for a small fee. Capitalize on the skills you use at work or outside of work.
There are a lot of options at your disposal here. Just make sure you have fun doing it, because money for money’s sake isn’t what life should be about. Remember the story of Pyrrhus and Cineas from Plutarch’s Parallel Lives (here summarized by Russ Roberts in How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness):
Pyrrhus, the king of Epirus, a region of Greece … is planning an attack on Rome. His trusted advisor, Cineas … thinks it’s a bad idea. … Here’s how Cineas begins in Plutarch’s version: “The Romans, sir, are reported to be great warriors and conquerors of many warlike nations; if God permits us to overcome them, how should we use our victory?”
Well, says Pyrrhus, once we conquer Rome, we’ll be able to subdue all of Italy. And then what? asks Cineas. Sicily would be conquered next. And then what? asks Cineas. Libya and Carthage would be next to fall. And then what? asks Cineas. Then all of Greece, says the king. And what shall we do then? asks Cineas. Pyrrhus answers, smiling: “We will live at our ease, my dear friend, and drink all day, and divert ourselves with pleasant conversation.”
Then Cineas brings down the hammer on the king: “And what hinders Your Majesty from doing so now?”
We have all the tools of contentment at hand already. You don’t have to conquer Italy to enjoy the fundamental pleasures of life. Stay human and subdue the rat within. Life’s not a race. It’s a journey to savor and enjoy. Ambition — the relentless desire for more — can eat you up.
When everything is said and done…
You want to make financial moves now that will set you up well later in life.
By all means, live a little. You work for a reason, and it’s to live — so please do so. But try to make smart choices that will pay off for you later. Remember that hardly anything great/amazing/worthwhile is built in a day, and there is definitely no such thing as “perfection.”
You will mess up every now and then, and you may bump your head. You may run up your credit card debt (been there) or make a bad investment (been there, too). Your retirement allocations may have to change when “life happens” (raises hand), but you keep it up. Arm yourself and conquer the financial landscape in front of you.
All of your tinkering will pay off (pun intended).
You reap what you sow, and the decisions you make today will have consequences you eventually have to live with. Wouldn’t it be nice to make choices you’ll be at peace with later?
Think about that.
Peace, and thanks for reading.