It is Never Too Early to Invest in Your Future

It is never too early to start managing your finances. Here are some tips to get you started on a road to financial health even if you are only in college.



Some jobs will automatically enroll employees in a 401(K) program upon hiring. If this is the case, you may already be saving automatically. Typically, companies start contributions at three percent, which is low. Harold Pollack recommends saving ten to twenty percent of income.

401(K) accounts are tax-deferred. You should also be saving in a taxable account. Optimally, you would have your bank automatically send a set amount of your direct-deposited paycheck to a savings or investment account. In most cases, you don’t miss what you don’t see in your checking account. You adapt. If possible, over time you should strive to increase the amount being transferred to savings. This helps develop your habit of saving early. Watching your money grow is very rewarding.


Life comes with unexpected bumps. You want to be prepared. Of the money you are saving, set aside a portion for emergencies. Start out by setting a goal of 1,000 dollars. This savings account should take priority over any retirement accounts. You don’t want to be forced to tap into your retirement funds early. The penalties involved can be steep. Although in a perfect world, you want to contribute to both even if it means eating ramen noodles for a while. Once you have a nest egg of 1,000 dollars, work towards setting enough aside to cover your expenses for three to six months. If you lose your job, it could take some time to find another one. You want to be covered.

Spend Less

It seems intuitive, but you should never spend more than you earn. Today, people tend to live on credit. Avoid living off of credit cards. It is a slippery slope. Resist the urge to let expenses increase as your paycheck does. Instead, invest that extra income in your 401(K) or put it aside in a savings account. Spending less than you earn helps you stay on top financially. It is easy to get trapped in a downward financial spiral even when you have a good paying job.

Employee Benefits

Few people take full advantage of a company’s offer to match their 401(K) contributions. These programs are typically an underutilized benefit. Consider opting into a Roth 401(K). Many companies offer Roths. Unlike traditional 401(K)s, they are funded with after-tax dollars instead of being deferred until you take it out in retirement. These accounts are great for young people with low incomes. It allows you to build up a pot of money that won’t shrink because of taxes.

Some companies offer disability insurance as a benefit. Premiums are typically pretty small. Many individuals focus on life insurance when you are more likely to become disabled than dying. If you pay the premium yourself, payments are tax-free.

Maximizing other employee benefits can make your money go further and lowers your wage amount for income tax purposes. Opt-in for flexible spending accounts, health savings accounts or commuter programs. These programs might reduce the amount of money you have to live on, but it means you have money when you really need it.

Getting your finances in order is never an easy task. By starting at an early age, you can develop good spending, saving and investing habits. It is tempting to let your expenses grow as your paycheck does. You want the finer things in life. Buying a fancy new car or the newest tech gadget should not come before maxing out your retirement funds or putting money aside in savings for emergencies. Live within your means and never spend more than you make.