I am always surprised, and thrilled, to see young people posting in finance communities for advice when they're just starting out and still living at home. For one thing I'm jealous because I wish I'd started thinking about money in my early 20s. I'm also just happy for them. Here are my tips.
1) Don't flaunt your disposable income
Hopefully your parents are talking to you about money and you know their situation, a little. But in case you don't, make sure everyone in your household has similar spending habits, it will lead to harmony. Buying a brand new truck and going out every night while you live with two people who are worried about their mortgage is a fast track to making them hate you.
2) Pretend like you pay rent
If you aren't paying rent to your parents, look up the average rental in your area that you could tolerate living in, and add that rent amount to your savings goal. Don't get used to having a whole income that can be 100% disposable. The 50/30/20 budget of needs/wants/savings is a popular one. But if your needs are lower than 50%, add the extra to your savings, not the wants category.
3) Take advantage of your company's retirement plans
The earlier you start saving for retirement, the better. Can you put away the IRS limit for a 401k? Or at least get the most out of their matching dollars? The money you put away in your 20s grows like nothing else. I'm 45 years old. Every $1 I invested in 2002 when I started working has grown to $7 today.
4) Start a Roth IRA
A Roth IRA is a type of account. Once the money is in there, you can buy stocks or index funds to invest, and you don't have to pay taxes on the growth. You can only put in a set amount a year - 2025's limit is $7K. You can't look back in the year 2030 and decide to put in that 2025 money.
5) Try a 50/50 cash/investments split
Not sure if you want to invest or have a normal savings account? Try both. Since your expenses are very low risk, you don't need to build a big cash emergency fund up front. If you're saving most of your income, "six months expenses" shouldn't take long to save up anyway - your expenses can be very low. So now is a good time to get used to the stock market. Pick a low cost index fund - I'm mainly in FZROX - and pick a high yield savings account or money market at a bank. See who wins!
6) Spend slowly and wisely
Build good habits. Avoid impulse purchases. See how low your expenses can be for a month. Go out with your friends a little, but be careful. And definitely don't buy loads of stuff that you'll have to move around later. It can be a lot of hard work to get rid of stuff.
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