Personal Finance

Congrats on your first job out of college! This is aimed at helping you understand how to navigate the financial world now that you have a reasonable source of income. If you don't read anything else, follow this flowchart. If you have slightly more time, check out the guides in the personalfinance subreddit wiki.

Retirement

In general, the point of a job (besides personal fulfillment) is to make money for retirement. One common misconception is that you save money to the point that you have enough to spend for the rest of your projected life. For example, that means if you predict to live for 30 years in retirement and if you spend 50k/year, then you should save 1.5 million (ignoring inflation).

This isn't very reliable, especially if you predict wrong and have no money left. Instead, you want to save enough money to the point that the investment gains are roughly equal to your annual spend + inflation.

Specifically, (ignoring inflation), if you spend 50k/year and your investments grow at 1%/year, then if you retire at 5 million, then you'll be able to just spend the amount it grows per year.

So... how do you begin with investments?

Budgeting

Keep track of what money comes in or out! At a basic level, you can hook up your accounts to Mint. Although everyone's money allocation looks different, try to save at least 15% of each paycheck post-tax for retirement. You can track your investments at personal capital.

Emergency Fund

Build an emergency fund! This should be 6 months spending. Do this before you do anything else (except perhaps paying off high-interest loans).

Credit Cards

Credit cards are incredibly helpful for removing risk and making your money go further. Since you spend with credit, you can mark down fraudulent claims (for instance, if someone steals your credit card and spends money) or even receive reimbursements for concerts that get canceled, stolen items, etc. Additionally, many credit card companies offer travel points or cash-back. There's an entire community towards applying for credit cards to take advantage of sign-up bonuses. I recommend starting from thepointsguy to find what works best for you.

Other Resources

  • r/financialindependence
  • r/personalfinance

Referred in


If you think this note resonated, be it positive or negative, send me a direct message on Twitter or an email and we can talk. Also ping if you'd like to know the updates on this note.