A Twenty-Something’s Guide to Money

Oh what a fun topic we have for the blog today: finances.

For the record, I really am in no way qualified to give financial advice. This post is simply to share my experiences and the advice I’ve been given that has helped me. That being said…

Finances are actually one of my favorite things to discuss with people my age. I feel like my generation, for all its faults, has gotten a bit smarter when it comes to money and how to handle income.

Growing up, I was lucky that I didn’t have to give much thought to cost or how things in my life were being funded. I knew my parents worried sometimes about emergency house projects, saving for college, etc.. but there always seemed to be enough. I had summer jobs but I wasn’t pressured to save an exuberant amount and when it came to getting my undergraduate degree, my parents told me they wanted to pay for me, as their parents had for them. They had saved enough to send me to a small state school for four years and if I wanted to go somewhere else, I would have to take out loans. This was, by far, the greatest gift they could have given me.

Now, I was going to school to be a teacher, so I was well aware that loans would cause a pretty big financial burden once I graduated, considering a teacher’s salary. I was incredibly lucky that Rhode Island College, where I went, had such a great education program for a more reasonable price. I graduated without loans and in a great position to get a job.

When HR wrote my salary on a sticky note the day I signed my paperwork to work in Newport, I was floored. It wasn’t a huge amount by any means (again, teacher’s salary) but it was more than I had ever had to deal with in my life. I wanted to do things right, wanted to put myself in the best financial position as possible. When I started asking around for advice, I wasn’t surprised to find that people were saying things I’d heard consistently across the board.

Tip 1: Pay off debt as quickly as possible and avoid getting into it

I know I was incredibly lucky to leave college without any loans. So many new graduates are hindered by debt and what I was hearing from everyone is that debt is not your friend. The faster you can pay off debt and the more you can avoid getting into debt, the better off you are. Now, I understand that some circumstances require loans (let’s say you need a car and you haven’t acquired the savings to buy a used model) and that some loans do work to your benefit eventually (see: a home mortgage). It is my personal rule of thumb, though, that if I’m going to buy something, I should have the funds to cover it.

Tip 2: Create an emergency fund

I feel strongly about having an emergency fund and I’m actually only starting to build mine up at the moment. I don’t love the idea of not having a safety net, but I know I’ll get there. By the end of the school year, I would like to have an emergency fund that can cover my expenses for three months, if need be. Then, the goal will be six months. Then, it’ll be a separate fund for emergency events (a broken car, a leaky roof, etc.) What I’ve learned is that putting even a small portion of your paycheck aside can pay off in the long run.

Tip 3: Start saving for retirement as early as possible

The amount needed for someone to retire keeps increasing and by the time I’m in my sixties, it’ll be in the millions. That means I’m starting to save now. Through work, I have a pension (that, let’s be honest, is within a system that will probably collapse before I retire) and a personal retirement account. I also, however, opened another IRA in the hopes that I can deposit the maximum $6,000 a year. Supposedly, it’s best to have many, diversified accounts. I feel that at some point in my life, I’ll need to sit down with a financial advisor and really talk this out. For now, however, I’m just working on putting money somewhere with a purpose.

After I covered the three tips above, I was left with a decision. How do I budget the rest of my money?

Personally, I like to plan a general, complete but rough budget at the beginning of the school year. I know that I need to account for September through September of the next year. As a teacher, I don’t get paychecks during the summer, so I have to account for that. Each month for me includes three designations: rent, food, and general spending. Rent is great for us because utilities are included, which means it’s consistent. Food comes out to about $50 a week. I find that my general spending varies the most, but I don’t have to pay much in gas (hello island living!) and if I’m conscious about my spending, I can normally stay within the parameters I set.

Other than my monthly spending, I pay car insurance and my phone bill every six months. I try my best to have those saved months in advance. There are small expenses like my blog subscription, a gifting fund, and travel which I account for, but otherwise, a good portion of my salary goes to personal savings. Last year, 35% of my salary went to general savings (which then went to my “new” car) and 15% of my salary went to retirement. This year I hope to do the same.

Looking for more?

I recently read the book “I Will Teach You to Be Rich,” which I loved. The author gave great financial advice (and is a bit more qualified than I am!) with a specific plan to help you get your finances on track. I highly recommend you check it out and I hope it helps!

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