Today I am going to lay out how I save money for the future in a city with a very high cost of living. My goal is to serve as a guide to show you that it is possible to start saving money now, even in a city like NYC.
Question: What’s the point in putting $$ away when you’re only 23?
Answer: It’s the easiest way to build wealth
Outlined below are five ways I try and save money on a consistent basis and still have disposable income.
- This is the easiest way to save money. If your company offers a 401k/401k matching program, take advantage of this. My company offers a competitive 401k matching program which literally gives me free money. I also don’t have to worry about setting aside a % of money myself each paycheck because my employer automatically deducts my contribution each pay period, making the process of investing completely painless.
- Roth IRA vs Traditional 401k
- In layman’s terms, a Roth IRA = post-taxes & a Traditional 401k = pretax
- Resources: 401k Help and 401k differences
Fun Fact: ~80% of companies that offer a 401k program offer a match on employee contributions
B. Investment Management Accounts
- I have 2 accounts that have been open for years that my parents started for me when I was a baby. Right now, I’m not adding any money to either of these accounts, they just gain interest. The 2 investment firms buy and sell investments for me. Fees are associated with these accounts and it’s extremely important to understand fees.
- Value-add: Helps me reach my long-term financial goals
- Resources: Investment firm example
My favorite way to save money and watch it grow.
E-Trade is a financial services company that allows people like me and you to invest online. It’s important to understand fees and commissions when it comes to investing. I would recommend you do some research into topics like the difference between investing in actively managed funds and index funds.
If you’re scared of the stock market, don’t be! As a quick investor 101 to try to take away some worry, I’ll quickly explain the difference between a Correction and a Crash (bear market)
It’s dangerous NOT to be in the stock market.Why? If you are not in the market during the best 10 days you’ll go from 8.2% to 4.2% (THE POWER OF COMPOUNDING!).
E-Trade has helped me create a money making machine while I sleep.
- Resources: Unshakeable by Tony Robbins, How to Invest Your Way to a $70 Million Retirement Fund, Buying Index Funds = $$
D. Money Saving Chart
- Want to save $ in a fun and rewarding way? Check out this chart I found on Pinterest.
- The max amount you save each week is $60. If there’s one week that you’re spending more, then you can check off a lower value box like $4. This chart equates to 1,000 in savings in a year. Each week I pick a box, take the money out of my checking account and deposit the set amount into my E-Trade account. This way I know I’m not going to touch the money. Then, I research index funds and figure out what I want to buy and use that money. If I’m buying a very low-cost index fund, sometimes I can buy it right when I deposit my set amount. And look what’s happening now, we’re compounding baby!
AKA making more money right now on that $1,000 investment.
- The final way I’m investing in my long-term financial goals is through reading. There are great books and articles out there about how to invest. Use these resources to better yourself. The more you put your brain to work, the better equipped you will be in a multitude of areas in your life.
- Resources: Addison’s book suggestions
Remember, it’s important and necessary to diversify your investments. Start today!
I think that the first thing is you should have a strategic asset allocation mix that assumes that you don’t know what the future is going to hold.Ray Dalio