Financial Advice For 22 Year Old

[lancerplayer]

I graduated college in May and have been working for 6 months. I am being compensated well for my first job out of college and I want to formulate a solid strategy and invest young. Through talking with wealthy and successful people, one tip I keep hearing over and over is to start young.

The only debt I have out of college are student loans, which are not of a substantial amount. I have been researching and studying well known authors of personal finance books, such as Dave Ramsey and Robert Kiyosaki, and have learned a great deal. I have not met with financial advisors in my area, but plan to do so soon.

In the mean time, what advice do you have for a 22 year old professional that is just starting out in terms of investing? Because I am young I feel I can take greater risks and gamble to a certain degree. My risk tolerance is not high, but I believe I can risk more than the average investor.

Simply put, is there any financial advice you wished you received when you were just beginning your career and starting out in your twenties? If so, please post!

Thanks for your time and help!

 

[Pop_Rivit]

You're on the right track-my advice to you would be to keep doing what you're doing. Stay out of debt except for a home mortgage (and make it as small as possible). Save like mad, especially your while you're young and let the money grow throughout your lifetime. Learn and practice a lot of self control with your money, and live within your means.

Don't have children until you're financially ready for them-the costs are huge and it's a tremendous burden for someone in their 20's just starting out.

Congratulations on both your college and career successes.

 

[Burt]

While people will tell you to buy more volatile growth, small cap or international discovery funds, I think you still need to (1) pay down debt (2) stay conservative for awhile.

I assume you are saving for a down payment on a house and don't want to delay when you are ready because the stock market might be in the tank? Also when you are young you don't have much cushion and again if the economy tanks and you lose your job, its a double whammy.

But do put everything into 401k and company matching that you can.

 

[HerrStig]

Originally Posted By: Pop_Rivit
You're on the right track-my advice to you would be to keep doing what you're doing. Stay out of debt except for a home mortgage (and make it as small as possible). Save like mad, especially your while you're young and let the money grow throughout your lifetime. Learn and practice a lot of self control with your money, and live within your means.

Don't have children until you're financially ready for them-the costs are huge and it's a tremendous burden for someone in their 20's just starting out.

Congratulations on both your college and career successes.
Live within your means and hope the government does the same.

 

[itguy08]

In addition to what the others have said, put at least 10% in your 401k plan. Never touch it.

Be wary of "hot" investments - slow and steady will win the race every time.

 

[greenjp]

Don't have children until you're ready. Marry well.

As for actual financial advice:
- don't be afraid to be cheap. The monthly bills people can accrue on cell phones, data plans, TV service, internet, etc are incredible. Figure out what you actually need and then be careful when getting extra.
- at a minimum, put whatever you need into your employer's 401k to get the full match if it's available. Beyond that, set aside as much as you can.
- continually save for things that are regular but not constant. For instance, budget $250 a month (or whatever) for your car payment, whether you have one or not.
- don't skimp on dental care.

jeff

 

[bubbajoe_2112]

Stay out of debt, max out your 401K (at the very least, up to your employers matching) as much as possible.

Also, if you are fairly certain you won't be moving in 3-4 years, now would be an excellent time to consider buying a house. With record low mortgage rates and the overall housing pricing slump, it would be hard to get hurt on that deal.

 

[Hokiefyd]

Originally Posted By: lancerplayer
Because I am young I feel I can take greater risks and gamble to a certain degree. My risk tolerance is not high, but I believe I can risk more than the average investor.


The other side of this coin is you're young: you don't have to take risks to amass a great retirement over time. If you can "make the market" every year, you'll have more money than you'll know what to do with. Google "index investing". John Bogle from Vanguard is also a great resource; he's written many books about the so-called rabbit and hare.

 

[opus1]

Max out your 401(k), at least up to the employer match. And then never touch that money for anything, no loans, nothing. As far as you're concerned, that money doesn't exist. One caveat, if your employer matches only money you put towards company stock, transfer your money out of the stock every now and then. You take enough of a risk working for the company, if it goes under and your 401(k) is all in their stock, you lose your job and your retirement.

Don't overbuy when you get a house. And don't buy a house as an investment unless you plan to be a landlord. If the time comes to sell and you make money, great, but buy where you want to live and what you want to live in, not something that you hope you can make a profit on someday.


Make sure to enjoy some of your money now. Tomorrow isn't promised to anyone. Don't go nuts, but enjoy some of it while you can.

 

[dparm]

Before you invest, please sock away 6-12 months of expenses in case of an emergency (laid off, severe illness, massive bill, etc). Don't touch it. Just throw it in a high-interest account and let it sit there for a long time. Keep it liquid but never touch it unless you absolutely must.

THEN focus on investing your extra money.

 

[rjundi]

Buy a "starter" house in hopefully upcoming area.

Where else can you turn $100k debt into $250k - interest in 9 years!

 

[Hallmark]

Investors can be broadly identified as (1) misinformed/uninformed, intimidated folks who often depend entirely on investment advisors/brokers to direct their financial affairs or (2) self taught, well-informed, knowledgeable persons who have the interest and skills to successfully self-direct their investments.

It is frustrating to observe the former as they forfeit thousands of dollars of their earnings/savings over a lifetime paying fees, commissions, mutual fund loads, etc. If you have the interest & aptitude to self-direct your investment, my advice would be to do proceed following the advice of others above.

 

[JHZR2]

Glad to hear of your interest. At 32, Im on track to have a fully paid for home VERY soon (in a pretty expensive area), no debts of any kind, and I am saving the legal max in all accounts... Sounds like you will be in the same boat.

Get rid of those debts ASAP. This is key. Your potential to do anything else is killed when you are tied to payments on stuff that isnt making you money directly.

Sometimes people talk about taking payments to leverage their money and use it elsewhere to make more. This isnt the boat that you are in. You can think about those "tools", employed smartly, later. for now you need to get out of the snare of payments.

The main thing to remember is that young folks especially waste a TON of money that they dont have. It took your parents 50 years to get what they have. Dont try to pretend that you have the same thing by 25. You dont. Take your time to get there.

Again, dont be ensnared by payments. Sometimes debt can be used to get to things quicker, like for example a good reliable car when starting out... But the deal has to be right, with super low interest, and you need to be disciplined enough to pay it off quick.

So the task that you need to learn, and learn first, right now, is how to set up a budget and allot all of your available funds, every last dime, as much as possible, to killing the debt that you have. Then you can learn saving and allocating funds to other things.

Youre doing great already! Watch the traps that they put out to ensnare everyone. Dont take advice from people who are broke or live life payment to payment, no matter how smart they claim to be financially. Payments mean only one thing - youre living beyond your means.

 

[ChiTDI]

Originally Posted By: JHZR2
Glad to hear of your interest. At 32, Im on track to have a fully paid for home VERY soon (in a pretty expensive area), no debts of any kind, and I am saving the legal max in all accounts... Sounds like you will be in the same boat.

Get rid of those debts ASAP. This is key. Your potential to do anything else is killed when you are tied to payments on stuff that isnt making you money directly.


We got a winner !!
Congratulations, John. That advice has kept me well for forty working years and ten retired ones.

Follow that advice, then read Bogle's books and dollar cost average correctly, spend frugally, marry well, live within your means (and hope the government does the same- that is a great line from someone else on this forum.)
Smell the roses, support the veterans and give back to the needy.
As Sade says "Everyday is Christmas and every night is New Year's Eve".

 

[Donald]

Put as much you can into your 401K, select a combo of index funds. Get 6 months of expenses in a money market. Be reasonable on expensive things like a car.

Enjoy your life rather than rush and get married and have kids.

 

[SwampSurvivor]

From a 24 year old with a ton of student loan debt - avoid ANY debt. Period.

I have a ton of student loans, car payment (bad bad bad) but not a dime of debt elsewhere. Any extra money I have goes to pay something down.




Originally Posted By: JHZR2
Glad to hear of your interest. At 32, Im on track to have a fully paid for home VERY soon (in a pretty expensive area), no debts of any kind, and I am saving the legal max in all accounts... Sounds like you will be in the same boat.

Get rid of those debts ASAP. This is key. Your potential to do anything else is killed when you are tied to payments on stuff that isnt making you money directly.

Sometimes people talk about taking payments to leverage their money and use it elsewhere to make more. This isnt the boat that you are in. You can think about those "tools", employed smartly, later. for now you need to get out of the snare of payments.

The main thing to remember is that young folks especially waste a TON of money that they dont have. It took your parents 50 years to get what they have. Dont try to pretend that you have the same thing by 25. You dont. Take your time to get there.

Again, dont be ensnared by payments. Sometimes debt can be used to get to things quicker, like for example a good reliable car when starting out... But the deal has to be right, with super low interest, and you need to be disciplined enough to pay it off quick.

So the task that you need to learn, and learn first, right now, is how to set up a budget and allot all of your available funds, every last dime, as much as possible, to killing the debt that you have. Then you can learn saving and allocating funds to other things.

Youre doing great already! Watch the traps that they put out to ensnare everyone. Dont take advice from people who are broke or live life payment to payment, no matter how smart they claim to be financially. Payments mean only one thing - youre living beyond your means.




Unrelated, but I'm looking forward to the day I'm out of student loan debt! Currently I have a pretty ridiculous amount of student loans (the minimums are more than 1/4 of my income!)

I won't know what to do with myself once I get rid of this car (and it's attached payment) and the student loans. I'm a very frugal person by nature.

I have no other debt, and my Rent/car insurance/ electric bill are only slightly above 1/4 of my income. I'm ecstatic for when I can save up 3/4 of my income. By the time I get my student loans paid off, I'm sure I'll be making significantly more.

 

[PandaBear]

All good advices here. Remember all investment has risk and paying off debt is no risk. So if you have high interest loan pay them off fast, and never miss an employer match 401k contribution.

Another good investment is yourself. If you have a potential to make more money by going for a more advanced professional degree (law, medical, MBA in a good school, engineering in some cases), save up and go back to school so you can increase your future income. I'd not recommend this for liberal art or education degrees however, as they don't always give a good return on investment.

 

[hardcore302]

I know it's simple, but bringing your food to work will save some moolah. It's nice to see young responsible people. Good luck, you seem to be on the right track.

 

[nitehawk55]

Yes , marry into wealth

 

[Dakota1820]

Originally Posted By: nitehawk55
Yes , marry into wealth

agreed!!! lol seriously though LIVE WHITHIN YOUR MEANS!! something most people cannot/ wont do. heck i am 21 have an apt 3 cars internet phone and tv. and to be honest with you. i hate my phone its 100 a month for my phone and my wifes. thats a stupid amount of money to pay for a phone and its on the cheaper side. don't feel like your less than because you dont have something feel smart. i catch myself feeling a little jealous that someone has a 500 phone but i am reminded how stupid that is. that said things like car payments are worth it in the right situation. if you need to establish credit history and the car you have is costing you more than a car payment would. but overall live simple! save at least a 6 month stash of bill money before spending a lot. and its not a bad idea to own things you could sell if you ever get in a pinch. just be smart and sit down with a financial planner and go from there.