Graduates, if you just got yourself a brand-spanking new FIRST REAL JOB, you are in a position to strike it rich! You are the lucky ones!
To get rich, the first thing you need to do, as soon as you start your first day of work, is go to the human resource department and get your benefits package. Somewhere in that large pile of paperwork is information on how you can begin your 401K, 403(b), or whatever retirement equivalent. Before you even collect your first paycheck, sign up to have 15%-20% of your paycheck automatically deposited into your 401K.
What did I say? Go back and read again. Yes! Begin to save 15%-20% (or MORE!) of your salary in your pre-tax retirement account immediately before you get used to seeing that money in your paycheck!
The benefits of doing this right away is that a) you’ve never seen the money, you won’t miss it b) Uncle Sam takes a much smaller bite of your money c) your money stays to work for you, not the government d) you get rich a heck of a lot faster and e) you forget about it after a month and a year later, when you receive your yearly statement, you’ll be glad you followed this advice.
You wait a few months to begin saving in your pre-tax retirement account and boy, it’s a lot harder to see that large chunk of money go. It’s so much harder in fact that most people never get around to saving for their retirement, thus they waste all their money and have to rely on Social Security for their retirement and they never build wealth for themselves. Don’t be like them.
Why am I recommending 15%-20% when most financial advisors recommend 10%? Because when you are a brand new graduate, the difference between saving 10% and 20% is nothing since you’ve never seen your first honest paycheck. You can save 20% without EVER knowing what it feels like to save less and see more in your paycheck. As a frugal living new graduate, you also have the skills and mentality to live on a smaller paycheck. Within a year, however, you will see a HUGE nest egg growing in your 401K. And if you save 20% in your pre-tax retirement account…you will be one of the very few, truly wealthy people who can afford to retire early.
Think about that before you say, “I’ll do this later.”