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These articles are just motivation for you to put money away...no matter how much or how often. Just put money away as early as possible and if you are lucky enough to grow old you can choose to stop working if you want to.
Again, this was an answer to Ramsey's article which showed how much one could make by investing $2000 per year for for just the first eight years out of high school. I don't know how old you are but investing $40-50 per week these days should not be that hard of a challenge. If your first job out of college doesn't allow for that, then perhaps you chose the wrong major.
As someone who graduated with $12.5K in loans after obtaining a business degree, I was trying to eliminate debt which IMO is a better financial plan than socking away money in savings. I paid off my student loans by the time I was 25 and I bought a condo at 26 all while saving to put money away into my 401K and IRA. Regardless, between 18-24 I did not have much extra money to put away like this and that has NOTHING to do with my major...
I want to meet a 19 year old who is capable of saving $2K per year. I was a broke college kid with a part time job just trying to pay down tuition so I didn't have huge loans after school. Then after school at 22 years old I sure as heck didn't have an extra $2,600 to throw into savings.
Depends on your goals. I'm 25. I had a lot of scholarship $$ and worked my ass off working 3 part time jobs, plus school and a 3-season athlete. It can be done.
Again, you seem pretty smart with your finances. Most people our age piddle away cash. Hell, I'd assume you live downtown, probably in Lincoln Park or Lakeview or have friends who live in those areas. You know how easy it is to thrown down $60-70 on a night out... 4-6 times per month... It all adds up.
As for "not being that hard," a minimum wage worker will only be taking home about $200/week. Putting 1/4 of that towards saving leaves almost nothing else to go on.
Well, here in the USA, the minimum wage is $8/hr. With full withholding a 40 hour/week worker would take home $256. In July when the min wage goes to $8.25 it would be $264. He'd also receive a large income tax refund every year. Never mind that there are a million ways to make money part-time, work overtime, or just qualify for a $9 or $10/hr job.
Plus, nobody should withhold the full amount from their paychecks just so they can feel good about getting a refund the following year. Whether you make $8/hr or $800k/year, it does not make sound financial sense to loan the government money interest-free. Especially since most Americans just run up credit cards all year hoping they'll pay them off or down with their refund check.
So, when filling out a W-4 form at a new job, ask yourself if you'd rather give out interest free loans to Uncle Sam for 1-15 months while simultaneously paying Capitol One interest......or would you rather just invest your money as soon as you're paid it?
Well, here in the USA, the minimum wage is $8/hr. With full withholding a 40 hour/week worker would take home $256. In July when the min wage goes to $8.25 it would be $264. He'd also receive a large income tax refund every year. Never mind that there are a million ways to make money part-time, work overtime, or just qualify for a $9 or $10/hr job.
Plus, nobody should withhold the full amount from their paychecks just so they can feel good about getting a refund the following year. Whether you make $8/hr or $800k/year, it does not make sound financial sense to loan the government money interest-free. Especially since most Americans just run up credit cards all year hoping they'll pay them off or down with their refund check.
So, when filling out a W-4 form at a new job, ask yourself if you'd rather give out interest free loans to Uncle Sam for 1-15 months while simultaneously paying Capitol One interest......or would you rather just invest your money as soon as you're paid it?
Quote:
The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). The federal minimum wage is $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. Some state laws provide greater employee protections; employers must comply with both.
You might live in a state with a higher minimum, but it's not $8 everywhere. As for your W-4 suggestion, yes, you can decrease you're withholding, however single-1 is typically considered a safe estimation for an individual living alone, and if you decrease your withholding too much, then you'll start getting hit with the need to pay quarterly. Single-1 rarely results in a "large" tax refund.
But let's be generous and assume a person brings home $300/week. So $1200/month(maybe a little more when 5 paydays fall in a month).
Savings: $200
Rent: $700
Food: $300
And... we're out of money... no room for utilities, transportation, or any of the other basic expenses.
My point remains, for people living pay check to pay check in a minimum wage job, $50/week is a ton of money.
You might live in a state with a higher minimum, but it's not $8 everywhere. As for your W-4 suggestion, yes, you can decrease you're withholding, however single-1 is typically considered a safe estimation for an individual living alone, and if you decrease your withholding too much, then you'll start getting hit with the need to pay quarterly. Single-1 rarely results in a "large" tax refund.
But let's be generous and assume a person brings home $300/week. So $1200/month(maybe a little more when 5 paydays fall in a month).
Savings: $200
Rent: $700
Food: $300
And... we're out of money... no room for utilities, transportation, or any of the other basic expenses.
My point remains, for people living pay check to pay check in a minimum wage job, $50/week is a ton of money.
Just to strengthen your counter fica is 7.65% with zero fed or state income taxes that still brings net income under 300 per week at 8.00 x 40
Going from a "historically never happened" rate to a "historically not likely happen again" rate doesn't make it better. 10% isn't realistic to assume for an average over a lifetime.
Agreed.
Quote:
Originally Posted by Jeo123
As for "not being that hard," a minimum wage worker will only be taking home about $200/week. Putting 1/4 of that towards saving leaves almost nothing else to go on.
But this is going to the opposite extreme. The percentage of people who make minimum wage is pretty small. Very few people work their whole lives for minimum wage.
If I'm reading this correctly, you need to put away those amounts in each year?
So that's $166/mo for age 18 = $2000
$408/mo for age 30 = $4900
I was 27 before I could even think about monthly bills more than $100. My first recurring bills were health insurance and a phone. My first large bill was when I bought a car - I needed a car and I'm still driving it now, paid off, and expect to for another 3-6 years so I'll get 10-12 years out of that car. Without that car I wouldn't have been able to get to work.
It could be done, but with much difficulty and assuming this 18 year old was continuously employed and had no setbacks. I'd say in a more realistic, but still positive scenario I'd say people could START this kind of program around age 26.
In a realistic scenario that takes into account likely negative setbacks and more realistic priorities, it's more likely to start in the early to mid 30s and and that would still require a fairly disciplined person.
If I'm reading this correctly, you need to put away those amounts in each year?
So that's $166/mo for age 18 = $2000
$408/mo for age 30 = $4900
I was 27 before I could even think about monthly bills more than $100. My first recurring bills were health insurance and a phone. My first large bill was when I bought a car - I needed a car and I'm still driving it now, paid off, and expect to for another 3-6 years so I'll get 10-12 years out of that car. Without that car I wouldn't have been able to get to work.
It could be done, but with much difficulty and assuming this 18 year old was continuously employed and had no setbacks. I'd say in a more realistic, but still positive scenario I'd say people could START this kind of program around age 26.
In a realistic scenario that takes into account likely negative setbacks and more realistic priorities, it's more likely to start in the early to mid 30s and and that would still require a fairly disciplined person.
Lots of people in their 20s blow money on the following:
Cigarettes
Alcohol
Tattoos
Recreational Drugs
$4 Coffees
Eating Out
The cost of this stuff adds up, maybe not to $2000 per year....but most people can at least get started. There are decent mutual funds that let you get started with small amounts.
The Amana Funds allow you to start with $250 for a taxable account and $100 for an IRA.
Lots of people in their 20s blow money on the following:
Cigarettes
Alcohol
Tattoos
Recreational Drugs
$4 Coffees
Eating Out
The cost of this stuff adds up, maybe not to $2000 per year....but most people can at least get started. There are decent mutual funds that let you get started with small amounts.
The Amana Funds allow you to start with $250 for a taxable account and $100 for an IRA.
The hardest part is just getting started.
We all wish we could go back and give our younger selves some advice.
I didn't waste much on tattoos, cigarettes, drugs and the like, but I spent my fair share on traveling, going out with friends, girls, etc... and yeah it cost money.
I possibly could have saved several thousand a year with great difficulty and not much of a social life. Everything should be done in moderation... however.... you're only going to have the physical ability (the energy, vitality, looks, body), the wherewithal, and most importantly the opportunity to have the kind of fun possible in your 20s.... well in your actual 20s. When you're 40 the opportunity is mostly gone even if the will is there, which it probably isn't.
I'm 32 and most of my peers are wrist-deep in poopie or even well beyond that now at the soccer-taxi stage, so I'm glad I had fun while I did because I don't have the kind of social opportunities that I used to. If that means I won't be a millionaire when I'm 70, so be it.
My dad died at age 69 from cancer and his last 7-8 years was a pretty linear decline. His money became mostly irrelevant to him once that decline began. I try to make prudent choices, but I'm also going to take the opportunity to live when given the chance.
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