Get first job; save for retirement
May 22nd, 2008 by Kim
Think back to when you got your first paycheck. Maybe you framed it. Maybe you cashed it and put a down payment on a new car.
Bet you didn’t think: “Wow! What a great chance to start saving for retirement!”
I’d venture to say that hardly any of my friends are thinking about saving and investing for when they reach old age. For Gen Y-ers, who tend to switch jobs every two years, even the thought of settling down in a permanent career seems light years away. So much for job security. So much for pensions.
I think most of us are conscious of the fact that we won’t have the same safety net to fall back on as our parents will when they retire. It’s a scary idea, but one that often gets pushed to the backs of our minds in the face of other matters.
Case in point: I talked to a friend yesterday who works two jobs. He bemoaned the fact that after plunking down money for various bills, tuition and car payments, he is basically living paycheck-to-paycheck. So, you can’t blame him if at the end of the month, putting an extra $100 into an IRA or a 401(k) isn’t foremost on his mind — IF there is even money left over.
“I try to, but then I realize I have no money,” he said. “It’s all gone.”
So, how do you convince a quarterlifer with a modest income to look 40 years down the road? I’m not sure. Perhaps it’s about setting long-term goals, like owning a house in Hawaii, and then realizing that there is no way you’ll achieve that goal unless you start doing something about it right now.
Here are some starting suggestions the experts have for saving:
1) Avoid running up high credit card bills, and pay off credit card debt. Consolidate student loans.
2) Open a high-interest savings account, and have a set amount automatically deducted from your paycheck and directed to it each month. Realize that time is on your side if you start saving early. Find a new appreciation for compound interest.
3) Open a Roth IRA and contribute to your 401(k).
4) Live with roommates to save on rent, or, if you are OK with it — live at home with parents.
5) Keep an emergency cash reserve that can go to pay for 3 to 6 months of expenses.
6) Check out this article from the Washington Post, which profiles three 20-somethings who are saving for retirement.
And if that doesn’t encourage you to start saving now, well, maybe this will.
Tags: finances, investment, money, work
May 22nd, 2008 at 5:13 am
What scares me into trying to save is the fact that Social Security (and Medicare) is going to be drained by the baby boomers, leaving nothing for us. People don’t realize that just setting aside 5% of your paycheck over 40 years pays back humangaloid. Just eat out less once a week!
May 22nd, 2008 at 8:16 am
If you go with the live at home strategy, take advantage of the opportunities(but don’t take advantage of your parents), take left overs for lunch, which sucks but all the money I save goes to my ira and investment accounts. Car pool, with gas being as ridiculous as it is, this is a huge savings and I don’t have to pay for parking in downtown.
The last thing that I do is when I do spend money I take the loose change and dolllar bills I get as change, put it in a jar, and at the end of the month, I deposit it into my IRA and investment accounts again helping those accounts grow and saving me some cash. The unintended benefit is it makes me think about small purchases that I don’t really need to make cause I want to hold onto my cash, silly maybe but its working.
Hopefully all of this will allow me to move out of my parents house and buy a house and pay off those pesky law school loans, within the next two years.
May 22nd, 2008 at 2:42 pm
i don’t know if there’s anything someone could teach to have a person change. all you can do is pass on that info and hope they absorb it. for me, when my dad died w/ only a small life insurance (just enough to pay the funeral expenses) and a very small social security payment, i know i needed to do something. some people really need to experience the pain and hardship to get motivated…unfortunately sometimes its too late…
May 22nd, 2008 at 4:50 pm
I save 3% of each paycheck and my company matches 3%. Unfortunately, Hawaii is extremely expensive (housing, utilities, food, gas, everything!) that there is pretty much nothing left for added savings. I guess it’s the price we have to pay for living in paradise…
May 22nd, 2008 at 5:15 pm
1. Finish school
2. Get job
3. ????
4. Profit!!!
May 22nd, 2008 at 11:30 pm
The most powerful force in the universe is compound interest.
-Albert Einstein
May 23rd, 2008 at 8:58 am
I highly recommend everyone in our generation read http://www.iwillteachyoutoberich.com/blog/, as the information presented is invaluable to the overwhelming majority of people our age.
May 25th, 2008 at 8:50 pm
My Grandfather got to retire as a fireman in his forties. He’s spent the forty years since retired, got to travel, move twice. Amazing how that all changes.
I guess we all just have to take the time to plan for our future but be open to what life may give you because you never know what can happen. I plan on a lucrative career in writing but am often told that is unrealistic. I suppose belief has to play in their somewhere too.
I’m looking forward to what may come regardless.
May 28th, 2008 at 12:48 pm
i’ve been contributing towards my Roth IRA since i was 20 years, just working an $8/hour work-study job in college. my dad was smart enough to set it up for me, and i automatically contributed $50 per month. now i’m 27 and i’m able to max out my yearly contribution even though i’m still in grad school and working multiple jobs. there’s ALWAYS a way, even if it’s small. think of all the years you have working in your advantage!!! we can’t count on anyone but ourselves these days… very scary.
June 3rd, 2008 at 5:40 pm
From personal experience, it’s very odd how Nationwide hit the nail on the head with their commercials - “Life comes at you fast”.
It seemed like just yesterday $200 from a college job was a ton of money I had no idea how to spend. Now, I’m suddenly worried about how I’m supposed to own a house soon and how I’m supposed to pay for it.
Most people just don’t realize what’s happening with their money. There are a few things people can do to help them understand what money is all about:
1) Talk with people that are about 3-5 years older than you. Especially with money, the priorities are different. One person might be waiting to spend that paycheck to lease the newest BMW model, while the other is slapping together some cold cuts between two slices of wheat bread, dreaming about his/her new home. Of course, it’s not always the case that the older person is “responsible” with money, but in general, you’d figure that’s the case.
2) Take some time out of your hectic weekend to actually plan out your expenses. Figure out what your normal monthly income is, figure out what your normal monthly expenses are (gas, rent, bills, food, entertainment, etc.) and figure out how much “free” money you have left over. If you feel like you’re being overburdened with your bills and expenses, doing this is probably one of the best things you can do for yourself. Say you take home $2,000 a month and have $1,300 a month in expenses/rent. Knowing that you have only $700 to ration over a month makes you a little more wary of your spending than if you concentrate on the $1,000 that gets deposited into your account twice a month.
June 3rd, 2008 at 5:42 pm
Oops, hit the submit button too early:
3) Talk with someone about money, like a financial planner, or just someone else that seems responsible with money. You don’t have to follow their “path to riches” or their advice, but it never hurts to have a second (or third or fourth) opinion.