OK. Now you've got your diploma and you've entered the job force. You are starting to realize that the work-a-day world is a bit different from the Tues. and Thurs. schedule of classes you lined up in your last few semesters. Partying until the sun comes up is over.
What's next? Well, this is where the fun starts and it comes at you fast. One day you wake up, you've got a mortgage, you're married, and, before long, a kid is on the way; so you're fighting for a raise. A lot is coming at you fast and furious. Navigating this maelstrom is tricky but highly rewarding, if you can get it right.
Tip #3 will point you in the right direction by recommending a book that can be read in a weekend that will put you on the path to making the right financial decisions. It should go without saying that it will help you avoid costly mistakes.
This book will also bail out some of you who will be beating your head against the wall in a few months trying to come up with an inexpensive gift for that young college graduate or any young person entering the work force, for that matter.
But first let us review where we've been. Tip #1 was for the youngsters. Get them forgoing soft drinks when eating out, and reward them with a dollar each time--to be spent however they want. This teaches them the concept of deferred gratification. They soon realize, that by saving up, they can get something really nice that they want. It also teaches the difference between wants and needs. There might come a day where they need to understand that cable TV is a want not a need, and cutting it off can save having to pay outrageous interest rates on credit card payments.
Tip #2 was for the young person with a summer job. That summer job typically means low earnings (and therefore a low tax rate) and the suggestion is to put part of the earnings in a Roth IRA and get started investing by buying an index fund. The purpose is to get exposed to the investment markets and to give a young person some "skin in the game" which sparks people's interest, especially teenagers. It makes investing a real world activity rather that a text book abstraction. The fact that time is on the side of the young person provides significant growth potential and makes it even more interesting.
Now for Tip #3. You've got several credit cards; you can't seem to save for an emergency fund; you're trying to manage your investments; you don't know whether to pay your student loan or to increase your 401k contribution. Take a weekend and read "I Will Teach You To Be Rich" by Ramit Sethi. Mr. Sethi speaks language of young people. He writes with an energetic style that will motivate and will answer many of the questions you have or should have. At the end of the chapters, he has action steps, presented as a six-week program.
For the bailoutees, let me remind you. Put this on your calendar for early May. When you are invited to that graduation party, you'll know exactly what to get the new graduate!
It should go without saying that I wouldn't be recommending Sethi's book if I didn't believe it's also an excellent intro to DIY investing! Happy reading!
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