I just graduated from college last year. I have a good job, pays well, and I try to stash away 30% of my monthly total pay. I see a lot of my friends with new jobs spending money like it’s going out of style, living like they make a million a year. Here’s the thing though, if you start saving and investing early, then you’ll be in a great spot when you’re older. Being a finance major comes with tons of great education for investing in your future, and the professors stress that through schooling. A professor once told me that he started investing just $1000 a year in stocks, at 23 years old. Those investments had grown to over a million dollars just by shear normal growth of the stocks. So coupling your saving with investments is a big deal that a lot of kids just don’t get. Here are some tips that help me save and prepare for the future, and why it’s so important.
What’s Really Important to You?:
From talking to friends in a similar situation as me, the main flaw that they have in their thinking is that they think their paycheck is spending money until they really need to save later in life. I put myself into a mindset that I make about $20,000. That may seem kind of drastic, but when it’s just you, then you don’t really need a whole lot. Take out your necessities (ie. Rent, food, car, utilities) and then make sure you take out some for your investments and savings. The rest goes to spending money, whatever you want to do. This way, when you have a family or more bills, then you’ll have a nice little savings to draw from in case of emergency. Seriously though, stop living like a Kardashian and get yourself a budget.
Realize how much you lose:
That professor that I was talking about earlier did a demonstration that showed just how much you lose if you don’t invest until your 30. That’s 7 years of not building your money and most likely spending it on things that you wish you didn’t. The total came to close to 250,000 if you invest right. 250,000…..a quarter of a million. That’s a nice chunk of change that you have. If you can stomach giving up that new pair of shoes or another night of eating out, then you can make yourself a lot of money.
Risk it:
There are certain things you can do when you’re young. I sprained my ankle 3 years in a row, one requiring surgery, and healed back up in about 4 months each time. In comparison, my Uncle sprained his ankle badly and was out for 8 months. He’s old, but still, the point is that when you’re young, you can recover quicker. Same goes for your investments. In your early 20’s, your investments should reflect a little risk since your lifestyle can handle a loss. When you’re in your 40’s and 50’s, a big loss is a harder hit to your finances.
It’s hard to get in to the mindset of saving and investing when you’re 23 years old. There’s so many things I can think of that I want to buy instead of setting aside some money. However, when you actually take the time to look at the numbers, you start to pick up that it might be worth your while down the road to start saving and investing young.
Saving when you’re young is always important.
Michelle recently posted..Student Loan Update and $805 in Extra Income
Funny, how the cold hard numbers says it all! Yet, so many ignore the numbers and defer saving to their thirties. By the time, I was in my thirties I wa son my way to financial freedom.
krantcents recently posted..Is There Right Time to Buy Real Estate?
It’s so important to start saving when you’re young. I really wish I had saved more the first few years out of school. The sad part is, I’m still ahead of most of my peers :/
CF recently posted..May garden update: Seedlings!
It was not always fun telling friends I wouldn’t go out or do this or that but a few years later I couldn’t be happier, starting early really makes a difference.
Pauline recently posted..Defining my dream, little guest house in Guatemala
The most important thing when you are young is to invest in yourself and education is only part of this.
Investing for 40 years may seem like a good idea but the numbers may mean completely different things by the time you get there – if you do. When I was young the idea of earning £1000’s a day would have seemed ridiculous and this would have been even more so if I had lived in a country saw hyper-inflation.
Money is fine but it is also not conserved. The important thing is understand what money really is, not to waste it and learn how to use it.
I invested in property when I was younger and yes we do have a nice house. But I wish I had travelled rather more for example.
I think this is why I’m so in favor of financial education when people are younger. While not everyone will make the best long-term decisions (no matter how old they are) I believe that at least a few younger people will start saving more aggressively if they realize the benefits that lay in the future for them!
Alex @ Searching for Happy recently posted..Learning New Things: Making a Windows 8 App
I might add that it’s important to go risky, but not too risky. I bet the farm with my stocks when I first started out, and it didn’t end up well. I definitely set myself back big time by going to aggressive. So it not only matters that you save, but you save in the right stuff.
thepotatohead recently posted..Outlet Vs Retail: The Great Shopping Debate
It could also easily be a metaphor for the rest of our lives. If we don’t start saving at this age, what else are we putting aside? If we cannot handle this most crucial topic are we going to fail on that vacation, that hobby, that book, that garden, that date, that job, that commitment, etc?
Scott @ Youthful Investor recently posted..5 Great Books to Learn Asset Allocation
One thing you may want to add is the importance of paying off debt. Given the rates some people are looking at on their student loans, money spent investing would go further paying down high interest debt. It would be nice to have investments from your early 20’s, but sometimes its not the best financial move.
Michael @ The Student Loan Sherpa recently posted..Preying Upon Veterans: A For-Profit Scam
Saving money is of prime importance as virtually there is nothing tangible that you can have without the exchange of currency.
Whether you have a 401k plan through work, or if you are self-employed and put your money into IRAs, saving and investing is the way to successfully build long-term wealth. By investing wisely now in a assortment of investment accounts, like CDs, mutual funds and other brokerage opportunities, you can better prepare for future goals, such as purchasing property, retirement or using the profits gained on your investments to travel the world.