Financial Learning Curve

[_brian]

I learned tons from my parents, but almost nothing about money. I ended up getting my handle on my finances through a lot of trial and error (mostly error). I mean I've seen it all: spending more than I make, letting my credit score drop, not contributing to savings like I should when I'd get the biggest gains from compound interest....I can go on. 

Anyone have a playbook or template they used right out of the gate? 50 - 30 - 20 rule or something like that they could help others avoid those pitfalls? My little brother just finished college and I'd love to help him sidestep my mistakes. 

Thanks in advance!

[marketstar99]

If you “Google” “Best books on personal finance management”, you will find a whole library of playbooks.
Dave Ramsey and Suze Orman are two of the more prominent authors/broadcasters on the subject, so you may consider starting with them.

Good Luck,

Marketstar

[xokazchaz]

wow, amazing, thank you so much for sharing all this

[johnf2]

We are non-officially retired at 62 because it is difficult finding full- or part-time work because discrimination is real and ugly.

What we have practiced is living beneath our means. One rule is the 80-10-10 rule of living on 80%, saving on 10%, and tithing to your church on the first 10%. 

I would always participate in your 401K and hopefully it matches.  At a minimum, participate at the maximum Company matching level.  If you company matches 1% to 1% for the first 4%, contribute at least 4%.

Generally, anything contributed to a Roth must be held at least 5 years before being withdrawn without penalty after age 59-1/2.  Consider keeping all your Roth IRA paperwork.  IRS tax law says for 5-year holding period for qualified distributions - it is separate for each Roth account and begins on January 1 of the year contributions made to that account. If one Roth account is rolled into another, the earlier start date applies (link: https://www.irs.gov/retirement-plans/ten-differences-between-a-roth-ira-and-a-designated-roth-accoun...) and see also “Qualified Distributions” in Pub 590 (link: https://www.irs.gov/publications/p590b#en_US_2021_publink100089543)

Your initial tax bracket starting out from college should be the lowest of your entire life. Thus, all initial contributions, in my opinion, should be to your Roth.

As your income grows and it increases from the minimum tax bracket of 10% (which you should closely monitor), you may then want to take some 401K traditional contributions of pre-tax at the higher tax bracket (e.g.  22%).  Your retirement tax bracket ought to be less than your career height bracket.

Greatest investment of all time is real estate, you can reach out and touch it.  All the best!

*** I am NOT a tax expert. I am a seasoned TurboTax user, and volunteer to aid TT users. Nothing I post is to be considered TAX ADVICE; I bear no legal liability for responses.***

[AmyC]

The best thing you can do is have an honest talk about the mistakes you have made and how it has hurt you more ways than just financially. Help him make a budget based on his real goals that he wants to follow. Should the budget include $5 each day for coffee or save $5/day for Tahiti? Understanding that you should buy what you need so you can later afford what you truly want is a hard concept for many. Each purchase should trigger - do I need or want this?  If the answer is want, it can wait and should be planned. For some, the coffee each day is a mental health issue and more important than other things. It just needs to be clear what the priorities are. You can't reach your destination without guidance.

Goals should include not only the big stuff but smaller things as rewards. Once I have my emergency savings met, I can buy a new tv.

Of course, failure to plan is planning to fail.

Saving as much as you can while young is great advice!

[allone]

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@johnf2 wrote:

We are non-officially retired at 62 because it is difficult finding full- or part-time work because discrimination is real and ugly.

What we have practiced is living beneath our means. One rule is the 80-10-10 rule of living on 80%, saving on 10%, and tithing to your church on the first 10%. 

I would always participate in your 401K and hopefully it matches.  At a minimum, participate at the maximum Company matching level.  If you company matches 1% to 1% for the first 4%, contribute at least 4%.

Generally, anything contributed to a Roth must be held at least 5 years before being withdrawn without penalty after age 59-1/2.  Consider keeping all your Roth IRA paperwork.  IRS tax law says for 5-year holding period for qualified distributions - it is separate for each Roth account and begins on January 1 of the year contributions made to that account. If one Roth account is rolled into another, the earlier start date applies (link: https://www.irs.gov/retirement-plans/ten-differences-between-a-roth-ira-and-a-designated-roth-accoun...) market-promocode.ru and see also “Qualified Distributions” in Pub 590 (link: https://www.irs.gov/publications/p590b#en_US_2021_publink100089543)

Your initial tax bracket starting out from college should be the lowest of your entire life. Thus, all initial contributions, in my opinion, should be to your Roth.

As your income grows and it increases from the minimum tax bracket of 10% (which you should closely monitor), you may then want to take some 401K traditional contributions of pre-tax at the higher tax bracket (e.g.  22%).  Your retirement tax bracket ought to be less than your career height bracket.

Greatest investment of all time is real estate, you can reach out and touch it.  All the best!

*** I am NOT a tax expert. I am a seasoned TurboTax user, and volunteer to aid TT users. Nothing I post is to be considered TAX ADVICE; I bear no legal liability for responses.***

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Your advice about 80-10-10 is realy good. Some young people need such advices