| So, you're 25 and just
starting your first big job... What's there to
plan for other than your hot, new car? Lots of
stuff!
Emergencies:
You should have three months of income in fairly
liquid money. (Remember that "liquid" means that
you can get your hands on it quickly without eating a
penalty.)
The first thing that young
people usually say about this one is, "Why? I'm
young and healthy. Nothing's going to happen!"
But, what if you're in a car accident and can't work?
What if you lose your job? Things are tough out
there and it may take you awhile to find a new one.
I've heard some people say that, if you're in an
impacted and unstable field (like IT), you should have
NINE months of income set aside for an emergency.
The second thing people say is,
"But, I'm just barely getting by. How on earth am
I supposed to save this much money?" Check out my
Pay Yourself First
and Give It Up to Get Rich
articles.
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Your First House or Condo:
This will be your most important and most lucrative
investment... And you'll need that down payment!
Don't buy the new car. Save that money for the
down payment. Don't spend a lot on your wedding
rings and wedding. Save that money for the down
payment. Don't spend a lot on lavish vacations
(you will have earned these more later). Save that
money for the down payment. |
Your Retirement:
Did you read about the
magic of
compound interest? When you are young is
exactly the right time to plan your retirement!!
Plan correctly and, even if you make just an average
income, you can retire early and extremely
comfortably... Maybe even rich!
College for Your Kids:
Once again, the
magic of
compound interest will come to your aid. When
that kid is born, start the savings account! If
you're at the right income level ($95,000 for a single,
$150,000 for both, if you're married), you can start an
Education IRA and put in up to $500 a year. If you
do $500 a year at 10% for 18 years, you can have
$22,799.59... Nothing shabby about that.
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