No one’s talking about your financial future so let’s talk about it.
When you graduate college you expect you’ll have this large wealth of knowledge about what you’re expected to do next with your money and when you accept a salary (much more money you were making in college) you should know where to put it. But we don’t. We’re all still unfamiliar with what accounts we need to have, who we should go through, how many credit cards we need and what a 401k is for.
I took this upon myself and started researching and reading. I went to the friends I had that I knew handled their money with responsibility and precision in where it was going. It quickly became clear that if you don’t do your own extent of learning about where your money should be going it will just sit and not be growing or utilized.
I HIGHLY suggest reading this book. The author dumbs down finances into a way you can understand what he’s talking about, what accounts you need, how to handle credit cards, how to handle your debt, what is conscious spending and how the f*$% to handle your money.
Until then I’ll get into a few important finance areas you should be tackling as you start out in your career and life.
APY Savings Account vs. Normal Savings Account
Opening a savings account that earns APY (annual percentage yield) is something EVERYONE can do and something I wish I did sooner. We may have savings accounts with our local banks where our emergency or extra cash sits but why not earn APY (annual percentage yield) on your money. There are many institutions you can set up an account for free and open this account. You are able to deposit and withdraw money any time you want and while your money is growing it is earning an annual percentage yield (this is free money)! Meaning, why not keep your savings in an account that will build and grow on itself depending on the balance?
I personally use Wealthfront and created my savings after college and wish I started earlier. Since I have earned a small but nonetheless growth on my money. Set up your account HERE.
A personal tip I know for those who already have a savings account with their bank is using their APY Savings Account as their long-term savings or big purchase. Such as saving for a car or emergency fund. It’s easy to not think about and have an auto monthly transfer and watch it grow month by month on its own. And if you access your savings account often you can keep your at-hand cash in that account for easy access. Although, I personally keep one account because even 1 month of APY earnings is more than none.
Steps to Opening APY Savings Account:
Choose who you’ll be opening your account with. I use Wealthfront.
Create your account
Link up your checking account that you will be depositing money from
Set up an automatic deposit
Decide how much you’ll be saving each month and input for your automatic deposit
Let your automatic deposit do the rest! It will withdraw automatically and every month your account will grow by 1.82%.
Your money can be withdrawn or deposited at any time for no penalization.
401K vs. ROTH IRA
This is all situational to you! Some companies are offering amazing 401k matching benefits and some aren’t offering anything better than your Roth IRA option. It is advised you do both! You can never be too careful when it comes to saving for retirement early (even though it sounds absolutely absurd to be doing so now you will be so happy you are)! It’s suggested you do your 401k research within your own company you work for and be sure you’re getting a good matching and if you are, put as much as you can into your annual 401k. Match it 100% if you’re able to and the company will do the same!
Regarding a Roth IRA this is money you won’t touch until you’re 60 years old (ideally) and it’s better that way. This is POST-TAX money meaning when you withdraw this account you take every single cent that is in the account. You are paying your taxes upfront and then inputting money into your Roth IRA account which is so beneficial to you in the future! I highly suggest creating a Roth IRA account EVEN if you can’t put a lot of money into it right now. Starting young will grow so fast! Create your Roth IRA account HERE.
A Roth IRA is good for those not knowing how or where to invest their money but wanting to see their money grow with time. You will select your risk level based on age, those that are young will have a high risk level due to the fact you won’t be touching this money until you’re 60 (ideally). Your account will then take the money you deposit and automatically invest and grow your money. This is a great account to set up while you’re young and have monthly deposits and watching it grow with time. It’s important to remember, only put in the amount of money you’re okay with losing.
Remember, if need be in case of an emergency or something you can withdraw the money you input into a Roth IRA but you cannot take out the earnings you’ve grown since starting the account. If you withdraw your initial deposits + earnings you will pay a fine before 60 years old. It’s ideal to not deposit money you will need to withdraw although there is no penalty if it’s the same amount you deposited.
Steps to Set Up A Roth IRA:
Decide on who you will be setting your account up with. I use Vanguard.
Create your account
Select your risk level (if you are young your risk level will be high due to how long you have until withdrawing your money vs. someone who’s 55 will have a much lower risk level)
Link up your banking information
Set up an automatic deposit monthly and decide in your budget the amount
Let your automatic deposit do the rest and grow your investment to your future!
* Referral links have been included in this blog.