Hey,
welcome to your 20’s! That sweet spot in life when you’ve just moved out of
your parent’s house, graduated from college, maybe started your first serious
job and you’re looking forward to being completely independent.
Unfortunately,
you’ve now got equally grown-up bills to pay—like rent, cellphone bills, car
payments, insurance and student loans. After paying those things off on your
entry-level salary, the last thing you want to do is put aside more of your
Vegas-weekend money into a savings account.
Yeah,
it’s rough. But the good news is that it gets better, and the better news is
that if you’re smart with your money now, it’ll get better a lot faster.
We sat down with a financial advisor, Daniel Grimm, to discuss the smartest money moves we could make now in our 20’s (and also the most common mistakes to avoid).
“One of the most important things to start doing is—whether you’re in your career or you’re still working at a part-time or a full-time job through college—is set in your mind that after your expenses are paid you’re going to start saving 20 percent to 25 percent of your paycheck and putting it toward savings and retirement.”
“Savings and retirement are two of the top stresses that Americans carry, but it is also two of the top things that Americans procrastinate until they need it. Retirement is only going to be enjoyable for you if you take the time to prepare for it. If you can start it now, you’re going to be a lot less stressed going forward.”
Market Watch - “Personal finance to retirement to economy and politics to investing. It even talks about cryptocurrencies. It’s not the only one I use to do my own research and studying, but it covers a good base and it’s got good general knowledge in there about really anything and everything to do with retirement and investing.”
“It depends. Most employers are going to offer a 401K that they match in. If that’s the case, that’s definitely the first place you want to start. If they match three percent and you put in your three percent, you’ve essentially doubled your initial investment with what they’re putting in there. I look at that as free money.”
“Especially
in your 20’s, you’re going to be in a lower tax bracket, you’re not going to have
as large of a tax liability—only contribute what your employer is willing to
match and put the rest of it into a Roth IRA.”
“Because when it does come time to take money out of there, you’ve already been taxed on it...when it comes out of your Roth, you’re not paying any capital gains or any of that—it’s tax-free.”
“The best way to gain large amounts of equity is through the purchase of a home—but what good is that going to do you if you foreclose on your home? You’ve got to be able to keep up with it and you don’t want to sacrifice what comes later in life and really hurt yourself. It’s not just a mortgage payment—there are all the other unplanned expenses that come with a home.”
“People who are saying 'get a home as soon as you can'—they’re not wrong but make sure that you have all your bases covered before you jump into it.”
“The
unnecessary amount of debt—because it happens fast. If you don’t have the money
to buy it, you don’t buy it. At least I hope everyone knows when you borrow
money you have to pay it back, but I don’t think there’s education around
knowing the consequences [of debt]—knowing how it works, knowing what happens
if you don’t pay it.”
“If
you’re not paying yourself back, you’re not going to be enjoying life. You do
need to enjoy your life—it can’t always be work, money, paying bills—all the
stuff that nobody really wants to be doing, but it’s the way the game is played.”
“If you’re paying your expenses, you’re putting your 20 percent to 25 percent away, in my mind (it’s not a one-size-fits-all) you’re pretty free to do whatever you want with what’s remaining. And it’s not to say you can’t touch the 20 percent to 25 percent, you just have to be reasonable with it.”
“If you’re just putting money aside for those things when they do happen it’s not: 'well I just spent $100 and I don’t get paid until next Friday, I don’t have money left and I have to find out how to make it last.'”
“We kind
of have this outlook where if you don’t have a degree, you don’t have a home,
and you don’t have a nice car you’re not living up to some made up, societal
expectations—and that’s not the case at all. If you were to take your average
28-year-old who has graduated, owns a home, and a semi-new car—you’re sitting
on at least $300,000 in debt right off the bat.”
“Whatever
financial obligations you may have, the last thing you want to do is put
yourself in a position where you can’t afford to keep those obligations. You
can become “house poor” where all your income is going into your home—you can’t
enjoy life because you’re trying to meet these societal expectations.”
“I would
say the biggest thing to do is to become debt-free and start a savings
account—an emergency fund—and putting into a retirement account and continually
adding to that emergency fund and continually adding to those retirement
accounts and paying off your debt. Once you get to that point, you can start
affording those nice things once you have established a nice base for
yourself.”
“Everybody’s
trying to do it all at once and you just fall into a giant debt trap.”
“It’s subjective, but as long as you’re doing that 20 percent to 25 percent of your paycheck you’re going to be on the right track. And I realize not everybody can do that 20 percent to 25 percent because a lot of people are still living that paycheck-to-paycheck kind of life—by the time expenses are gone, pretty much everything else is gone.”
“If you’re practicing proper spending habits then eventually you’re going to catch up and get to that point.”
Daniel Grimm is a Financial Advisor and Registered Representative at R&R Group. Daniel Grimm has years of experience working in the banking and financial industry, guiding his clients through investment and money management decisions. If you have questions for Daniel about his interview with CreditRepair.com, you can find him at RRGroupUSA.com.
