Real World Personal Finance Advice For 21 Year Old

[Dynasty]

I'm seeking personal financial advice from those that have been on this earth a lot longer than I have. I am 21 years old and entering my Senior year of college and will be graduating with B.S. degrees in Accounting/Finance in May. Everything I have learned about personal finance has been from text books. I have quickly learned that textbooks do not always tell it like it is. One man's advice i try to closely follow is Dave Ramsey, but I am hoping some members here can provide real world advice on how to succeed when it comes to personal finance. I figure the more I know when I'm young, the better off I will be in the long run. Is there any advice you wish you recieved as a young 20 something year old fresh out of college in regards to personal finance?

Thanks for your time and help!

 

[constant struggle]

If you can live at home for a year rent free - and save 80% of your take home income - do it. It may be loserish, but it will give you a huge advantage.

Also - if you just started saving now, you are 21 years late! (THINK OF ALL the compound interest you missed out on!)

 

[HgaleK]

I'm not an old timer, but I've got my personal finances on lock. Keep track of your spending. The easiest way it to break it down in to Food, Fun, Necessities, Gas, Misc. and then break it down further depending on your needs (for example, clothes might be thrown in there under "fun" if it's a large portion of your spending). Then look at your spending and find the inefficiencies that are costing you money.
-I'm super OCD about this and have running averages on the amount of time that purchases last me. I can project costs pretty accurately and know what I can remove without it causing damage if I have unforeseen circumstances arise and I'm in need of a bit more cash. It also helps you to figure out which items to buy in bulk, and which to buy in smaller amounts. Quick example: I just saved an estimated $20/year by moving from cheap 4 pack toilet paper to nice 12 pack toilet paper. I'd move to 24, but it limits space.

Get a credit card with benefits that you like and use it for your purchases. Try not to spend too close to the limit. Raise the limit as often as possible. Credit card benefits are free money, and credit card companies are free protection. If you've got self control, you can't go wrong with a credit card.

Edit: and of course, pay that ***** off every month

 

[scientific]

what did dave teach that your textbooks got wrong? that EMH is a tautology?

 

[Ace Rimmer]

I wish I had read "The Richest Man in Babylon" at age 21. It's a short book on the principles of personal finance. It is not a "how to" book, but it will instil you with the principles that should drive your life in the world of personal finance (e.g. pay yourself first). It's written as a series of parables so you won't get bored.

 

[Laffertron]

It doesn't need to be overcomplicated. Develop the iron clad habit of spending less than you earn, and invest for the long term.

If you can cut your spending to the bone when you start working you'll be setting your self up well both in terms of your nest egg, and more importantly, the habit of leaving a healthy buffer between your salary and your expenditures. You can always loosen up as you get older. Eg, Cooking at home for friends instead of eating out, Living with parents as long as you can. Don't buy a new car, drive the cheapest reliable car you can find, or don't use one at all if you can manage without it. I would still try to make travel a priority at a young age if you don't have to go into debt for it.

Managing your money is important but don't let it take up a significant amount of your time - automatic deductions invested in the index or your retirement fund are pretty "set and forget" so you can focus on your career, which is going to give you the best return on your time invested.

Any career advantage you can get at a young age (such as early promotion or mentoring from a senior colleague) will persist throughout your career because it positions you well for the next promotion, etc.

Full disclosure: I am 27 so it's only been 6 years since I was in your shoes but I've largely followed this advice and it's set me up pretty well.

 

[HomerJ]



I'm not an old timer, but I've got my personal finances on lock. Keep track of your spending. The easiest way it to break it down in to Food, Fun, Necessities, Gas, Misc. and then break it down further depending on your needs (for example, clothes might be thrown in there under "fun" if it's a large portion of your spending). Then look at your spending and find the inefficiencies that are costing you money.
-I'm super OCD about this and have running averages on the amount of time that purchases last me. I can project costs pretty accurately and know what I can remove without it causing damage if I have unforeseen circumstances arise and I'm in need of a bit more cash. It also helps you to figure out which items to buy in bulk, and which to buy in smaller amounts. Quick example: I just saved an estimated $20/year by moving from cheap 4 pack toilet paper to nice 12 pack toilet paper. I'd move to 24, but it limits space.

Sounds like fun.

 

[JoelF]



Sounds like fun.

Come on man he's moved from the cheap to the nice toilet paper, his ass must be grateful every day.

 

[HgaleK]



Come on man he's moved from the cheap to the nice toilet paper, his ass must be grateful every day.

I know it seems silly, but it's a quick example. I spend 15-30 minutes a week keeping track of my spending and have a complete understanding of my finances and how to improve them without resorting to scrounging for everything. It's a bunch of little things- $5 here, $30 there, etc. but it's made a difference. Most people have no clue what they spend their money on- they just think they do.

 

[austinite]

I recommend Iwillteachyoutoberich.com. I have mixed feelings about the "earn more money" portion (it has good advice but it is also a sales pitch), but the personal finance stuff is all gold. One of the principles is to do exactly the opposite of what a previous poster said. Pay yourself first with automatic savings systems, then spend the money that's left on whatever makes you happy. Don't worry about saving money by using horrible toilet paper. This is styleforum after all. That brand of thrift doesn't mesh with $400 shoes.

 

[mr.orange]



I know it seems silly, but it's a quick example. I spend 15-30 minutes a week keeping track of my spending and have a complete understanding of my finances and how to improve them without resorting to scrounging for everything. It's a bunch of little things- $5 here, $30 there, etc. but it's made a difference. Most people have no clue what they spend their money on- they just think they do.

You've got your **** on lock son.

 

[HgaleK]



I recommend Iwillteachyoutoberich.com. I have mixed feelings about the "earn more money" portion (it has good advice but it is also a sales pitch), but the personal finance stuff is all gold. One of the principles is to do exactly the opposite of what a previous poster said. Pay yourself first with automatic savings systems, then spend the money that's left on whatever makes you happy. Don't worry about saving money by using horrible toilet paper. This is styleforum after all. That brand of thrift doesn't mesh with $400 shoes.

Goddammit. I use nice toilet paper. That was the point of it. Reading comprehension.

Edit: as far as $400 shoes go, this works with keeping track of your finances too. Knowing what your spending money on allows you to modify your spending to suit your needs. At 21 years old, money isn't going to be flowing quite as well as someone who's established. That means that it's kind of nice for me to able to see a pair of shoes, figure out the price, and then figure out how to create the money without changing my job situation. Maybe it's something as simple as making my own coffee every other day for a few months instead of going to Sweet Eugene's. I can see that it cuts down my expense by X amount per week, and the money goes to my new shoe fund instead of reducing the money that I'm putting in to my Roth IRA. I can also look at my food expenses and see that I'm not spending very much there, and given the amount of money that I spend on eating out, that it wouldn't be a huge issue to take my girlfriend out on a $300 date for her birthday. It's also cool to know that if I do need the money back that I can reduce extraneous spending elsewhere. It's not me cutting corners. It's me living better than many people making a whole lot more money than me because things don't slip through the cracks.

 

[austinite]

I recommend Iwillteachyoutoberich.com. I have mixed feelings about the "earn more money" portion (it has good advice but it is also a sales pitch), but the personal finance stuff is all gold. One of the principles is to do exactly the opposite of what a previous poster said. Pay yourself first with automatic savings systems, then spend the money that's left on whatever makes you happy. Don't worry about saving money by using horrible toilet paper. This is styleforum after all. That brand of thrift doesn't mesh with $400 shoes.

Goddammit. I use nice toilet paper. That was the point of it. Reading comprehension.

My bad, I wrote my reply a few hours after I read the thread.

 

[Joffrey]

If you have the opportunity to, live at home rent free for a year after graduating. You'll save a fortune. Even if you help with some bills, you'll still save more than you can imagine in that year.

 

[Elusive]

+1 richest man in babylon that is all you need in terms of how to manage your money follow it now and you will thank everyone on this forum in twenty years or so