That’s right, I’ve never before had a permanent, full-time job where I earned a real wage. Right now I do work full time, but I live on a small stipend each month. Previously, I’ve been a graduate teaching/research assistant and held numerous other paid internships as well as summer and part-time jobs. I’ve actually been working and getting a real paycheck since I was 14.
Despite all my experiences and preparation, I’m a little scared. Not that I’m traumatized, but I am afraid that I won’t manage my money the “right” way.
I’ve always prided myself on preparing for when this would time in my life would arrive. I’ve been good with budgeting, and I even would consider it to be a skill to live on the low income I have while volunteering . I’ve always told myself that I’m fine with living below my means. But, even with all this preparation, I’m a little bit scared for the real thing. Never having had the money before, I don’t know exactly how it will work out. I can picture myself saving and investing a certain amount of each paycheck, but, at the same time, I feel like I’ll always be wondering “Should I be saving more?”
I’ve seen lots of twenty-somethings crash and burn at this transition stage of life. I’ve seen the typical new car purchase right after finishing college. I’ve watched others buy iPhones and other gadgets before even starting a new job. Then there are fancy downtown apartments and eating out multiple nights a week. I know spending on these things aren’t “me,” but the temptations are always there.
There are so many things that I haven’t dealt with before, and I’m not sure how they’ll impact my income. I’ve never had a substantial amount of my paycheck taken for income taxes (actually, I’m not even sure what my after-tax income will be). I’ve also never had to deal with healthcare costs either. I’m sure it’ll be a learning process, and I hope to figure it out quickly.
Here are my general plans so far:
1. Try to stick as close to the same budget as I am now. This is going to be a challenge, and I’m clearly going to have to increase spending a little bit. But I know that I don’t need to start buying all sorts of stuff that I don’t need. The best strategy is to try my best to stay where I’m at now and slowly increase spending to a comfortable level.
2. Allocate a percentage of each paycheck to certain areas, including savings and investments. I’ve always liked T. Harv Eker’s 6 investment jars. The simplicity makes the chances of succeeding better, and I think everything there is adequate. This plan also allocates some money towards spending however I wish, which is essential. If you don’t budget for fun, you’re destined for budget failure. I’m also a fan of Dave Ramsey, and I’ll use his strategy as a general guideline (although I don’t agree with all of his advice).
3. I want to pay off my college debt immediately. I’m not going to mess around with this. I have only about $3,500 in loan debt left to be paid. My goal is to have this paid off by the end of 2011.
4. I’m going to adequately fund a Roth IRA for the first time. Unfortunately I won’t have access to any retirement benefits from my job, so it’s up to me to make the most I can out of retirement savings. I have a Roth IRA set up already, but it’s not getting much action. I’m gonna change that.
5. I’m going to emphasize saving for the short term. While I want to fund a Roth IRA, I’m not going to go too crazy saving for retirement. I have more short term financial concerns that I’d like to think about. First off, I’d really like to travel extensively next summer. I’m going to need several thousand $$ to do that. Secondly, I’m not sure what my future holds in terms of careers, work, and self employment. I’m really working towards taking a run at working for myself, freelancing, and improving my skills, and doing that will require some savings as backup while I make the transition. Much of my savings will be allocated towards accomplishing my working goals for now.
Considering everything, I think life will be better with a larger paycheck, but I know not all my problems will be solved by simply making more.
What do you think of my plan so far? Do you have any advice or lessons you learned?
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photo by: *_Abhi_*