3 Easy Ways to Jumpstart Your Personal Finance Journey
Coming out of college at 22, there was a lot of confusion as to how I should get into personal finance. The verbiage and amount of resources were so overwhelming that I decided to close that door and allow my future self to figure it out later. Lo and behold, it was now something I regret not looking into earlier. When time is on your side, you should act upon it. If I had been more aggressive back then, my savings basket would have been bigger.
As a 25 year old, there are certain things I always preach to my friends who are new to their personal finance journeys.
Starting with the basics, here are the 3 things I always like to tell my friends:
- Open a high APY (annual percentage yield) savings account.
If you are letting your money sit in Chase, Bank of America, or one of the major banks, the APY is probably less than 1% — move that money out.
I was receiving pennies in my saving account with Chase; the APY was 0.01%. And I had money with Chase for 10 years! Imagine how much more interest I could have made if I had simply utilized a better banking institution.
I use Wealthfront (1.82%*) now, but a few other good ones are Ally, SoFi, and HSBC Direct. I like to use Bankrate to compare rates, and see what the minimum contributions are. Rates do change time to time; just make sure it is above the US inflation rate so you are not losing money.
These institutions vary, but you want to make sure of two things:
- Ease of accessibility — Are there local banks? How is their online platform and how difficult is it to move money?
- FDIC insured — Most places offer FDIC insurance, but just double check. Federal Deposit Insurance Corporation is an agency that is designed to protect consumers and the U.S. financial system; if there is a bank failure (like it runs out of money), the FDIC will step in and pay funds you are due.
2. Look into your retirement options and start contributing to these funds early as possible.
401 (k)—a tax-advantaged, defined-contribution retirement account offered by many employers to their employees. You should check if your company matches to a certain percentage, and if so that they do, you better be maxing out your accounts. That is free money they are giving you to responsibly save for retirement (tax deferred)!
The most you can contribute to a 401(k) is $19,000, or $25,000 if you’re age 50 or older.
Roth and Traditional IRA(s)— IRA stands for individual retirement account; these are accounts set up at financial institutions that allow your savings grow and compound
For those new to IRAs and investing, I would recommend looking into age-based funds first to get the ball rolling; this helps you allocate and diversify assets based on your age and risk. Then if you want to select your own investments, you can go in and change your selections.
3. Read books and scour the internet as much as you can. Thank God for Google. Start with a few books and then dive into specific areas of personal finance that you want to focus in. Do you want to be a better investor? A better budgeter? What are your goals with money? How do you see yourself getting there? Join Facebook or meetup groups who are dedicated to personal finance — you’ll find that it’s incredibly motivating to have a community of likeminded people cheering you on, and pass along words of wisdom and advice.
The best advice I have received was from my father. “Learn from the mistake of others so you don’t have to repeat it yourself.”
Learn, learn as much as you can from reading and from talking to others.
There is no one who will drop in a block of information into your brain. This is all information you’ll need to seek out and learn, but the fact that you’re reading this now shows that you care. Your financial journey is incredibly personal and situational. It’ll be frustrating and irritating at times, but you’ll come to find that these small wins eventually snowball and you’ve come further along your finance journey than when you started.
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Follow me on Instagram at @fangfinance as I stumble and skip along my own personal financial journey.
