Your single years are a great time to get on track financially. It’s not necessarily fun to think about money, but it is a good idea to get a sense of where you are holding financially, what your goals are, and how you are going to reach them. Then you can implement a plan of action which frees you from thinking about money 🙂
Disclaimer: I am not an accountant or financial adviser. Please (please) speak to a qualified professional before making any financial decisions. This post contains the 2-cents (no pun intended) of a friend, not a professional.
For my first few years after seminary, while I was in school, I held an assortment of part time jobs that didn’t net me much. After I graduated with my master’s degree and started a “real” job, I did a little bit of freaking out trying to figure out how the best way to save, spend, and otherwise organize myself financially. I discovered Dave Ramsey’s Baby Steps, which gave me a starting point.
Here are some overall pointers:
1) Create a simple, non-intimidating budget. Even if you are single and living at home (like me), and you don’t feel like you have to actually “budget,” make a list of the things you typically spend money on and how often. For example: ballet lessons $75-100/month, facial $55/month, baby and wedding gifts $300/year, and so on. This does not have to be incredibly detailed and completely accurate, but cover your bases. Look over your Amazon account and credit card statements from the past few months. Don’t beat yourself up for not-so-responsible choices. You are on the right track! When you’ve calculated a realistic number per month, compare it to your income per month and calculate the percentage of your income that you are spending. I’m going to make the tentative suggestion that this number stay under 25% of your income after maaser, but different people’s life circumstances and incomes vary, so decide if that’s appropriate.
2) Dave Ramsey’s first baby step is to put $1,000 aside for emergencies ch”vsh, but I suggest you make it $2,000. This should be kept in an easily accessible place such as a debit account.
3) Pay back debt/student loans. This is priority because interest keeps compounding, so until that’s taken care of, try to cut back on all non-essentials in your budget. It is actually a lot of fun to watch your debt shrink and shrink.
4) Save up 3-6 months’ living expenses; that is, the living expenses you’d have if you were paying rent and grocery bills. Find a bank with good rates. A friend of mine recommends Ally.
5) Start saving for retirement. Here’s where you’re going to ask an accountant or financial professional what type of fund is best for you. My employer doesn’t offer any retirement plans so I have a Roth IRA through Vanguard, recommended by my accountant friend. If the whole topic of retirement planning overwhelms you, you’re totally not alone, but don’t let your confusion keep you from researching your options and actually saving. And with any retirement plan you use, put away the maximum that you can for as long as you can.
6) Pay your taxes. (The deadline is April 15. Don’t wait until the last minute). I use H & R Block, as advised by my accountant sister. Hold onto charity receipts, work-related receipts (this includes any food, clothing, or supplies purchased for work), and a log of your mileage (this is simple – on Google Maps, calculate how many miles a day you drive to and from work, and keep a log of the dates you drove to work). These deductions will save you money. If you’re paid as a contract worker as opposed to an employee, have your employer withhold a percentage of your paycheck so you won’t be hit with a huge tax bill come April.
7) Talk to someone (not me) about opening a credit card and building credit. This is not super-high priority. What is super-high priority is developing a budget and paying back loans.
8) Saving a little bit is a whole lot better than saving nothing! You can do it! And remember, parnassah is in the hands of Hashem!
Any advice or tips to add?
