Road Map to Building Wealth After College
I am 23 years old with a few months left of college and years of financial advice deep. My father is a financial advisor and hammered some key financial principles into my head as I got older. I grew up in a millennial generation with a financial goal of building wealth and establishing financial independence. This blog site will exhibit everything from my key principles, to my weaknesses, to referrals to the other key financial influences on my ideals.
Here is a road map that I have set for myself after years of research. This list comes from a mix of Dave Ramsey principles, modern financial advice, a bachelor's degree in business administration, and common sense.
Many different sources will tell you to put aside a different amount as an emergency fund. This total could be a seemingly random number like mine, or a carefully calculated number based on your monthly expenses. $2500 is a good amount to start with because it can cover 2-5 months of rent and living expenses depending on where you live. This should give you enough time to find a new job or adapt to the emergency faced. Always replenish this total before moving forward if you ever have to dip into it. This should give you the security to tackle the larger problems ahead.
Dave Ramsey is the king when it comes to getting out of debt. Our generation is plagued by extreme amounts of student debt. We all went to college and none of us can afford it. The thing that will separate the millennial millionaires from the millennial miseries is your ability to be disciplined enough to pay off your debt quickly. I, for example, have accumulated around $65k of student debt. This can be a daunting number but using Dave Ramsey's debt snowball and a student loan payoff calculator, you can tackle totals like this in 3-5 years. My plan actually includes me paying around $2k each month for 3 years to pay off the total.
A debt snowball includes paying off the lowest debt first and slowly working your way to the larger debt regardless of interest rates. For more information, visit Dave Ramsey's website or purchase his book "Total Money Makeover".
Loan Repayment Calculator
https://studentloanhero.com/calculators/student-loan-payment-calculator/
This is one that will be tough for our generation. We were raised on the idea that buying a house is a sign of financial independence and a sign that "we made it". This is true but not necessary yet. We want to be on a fast track to millionaire status by the time we are 30 if not earlier. Renting while we are paying off student loans shows that we are serious about getting out of debt. I will be posting later this week about the differences between renting and buying. Buying a house, in simplest terms, is just going much further into debt and not allowing yourself to focus financially on one debt at a time. This gives interest rates the upper hand and will result in paying more money out of your pocket. TACKLE ONE DEBT AT A TIME! Once you pay off student loans or any other debt, you will be able to save up the money for a down payment on a house and then move on to paying off the house.
When it comes time to buy a house, make sure you are buying the house that you can afford. Calculate how long it will take to pay off the house and make sure that you plan on living in the area for that long. Realtors will get you with the statement "the mortgage payment will be less than your rent payment" or "renting is like throwing your money away". In a way, I completely agree. But, on the other hand, usually that mortgage payment is based on a 30 year or more mortgage. If you don't see yourself living there for 30 years, don't buy into this option. Dave Ramsey preaches to never sign more than a 15 year mortgage. If you have no other debts to pay, you may be able to pay the house off even earlier than that. If you plan on living somewhere for 12 years for example, try to pay off the house in 12 years. This will give you a paid off house to choose whether to stay in the same spot and accumulate more wealth, or move somewhere new, sell the house in full and use that money towards your next mortgage. It could also potentially set you up with a rental property to accrue almost passive income in the future.
Here is a road map that I have set for myself after years of research. This list comes from a mix of Dave Ramsey principles, modern financial advice, a bachelor's degree in business administration, and common sense.
Start tracking your spending and create a budget
In order to really get an understanding of where you are at, you need to start tracking your spending. There are many different ways to do this. Apps like Mint, Clarity, banking apps, and Every Dollar will actually link to your debit card and track your spending for you. If you like to do things "old school" start writing your expenses down on paper as they occur. The thing most people identify at this step is that they are spending money that they don't realize they are spending. This will be the basis for your budget.
Set aside $2500 for an emergency fund
Many different sources will tell you to put aside a different amount as an emergency fund. This total could be a seemingly random number like mine, or a carefully calculated number based on your monthly expenses. $2500 is a good amount to start with because it can cover 2-5 months of rent and living expenses depending on where you live. This should give you enough time to find a new job or adapt to the emergency faced. Always replenish this total before moving forward if you ever have to dip into it. This should give you the security to tackle the larger problems ahead.
Write down all of your current debt and pick a strategy to pay it off
Dave Ramsey is the king when it comes to getting out of debt. Our generation is plagued by extreme amounts of student debt. We all went to college and none of us can afford it. The thing that will separate the millennial millionaires from the millennial miseries is your ability to be disciplined enough to pay off your debt quickly. I, for example, have accumulated around $65k of student debt. This can be a daunting number but using Dave Ramsey's debt snowball and a student loan payoff calculator, you can tackle totals like this in 3-5 years. My plan actually includes me paying around $2k each month for 3 years to pay off the total.A debt snowball includes paying off the lowest debt first and slowly working your way to the larger debt regardless of interest rates. For more information, visit Dave Ramsey's website or purchase his book "Total Money Makeover".
Loan Repayment Calculator
https://studentloanhero.com/calculators/student-loan-payment-calculator/
Rent until debt free
This is one that will be tough for our generation. We were raised on the idea that buying a house is a sign of financial independence and a sign that "we made it". This is true but not necessary yet. We want to be on a fast track to millionaire status by the time we are 30 if not earlier. Renting while we are paying off student loans shows that we are serious about getting out of debt. I will be posting later this week about the differences between renting and buying. Buying a house, in simplest terms, is just going much further into debt and not allowing yourself to focus financially on one debt at a time. This gives interest rates the upper hand and will result in paying more money out of your pocket. TACKLE ONE DEBT AT A TIME! Once you pay off student loans or any other debt, you will be able to save up the money for a down payment on a house and then move on to paying off the house.
Buy a house that you will live in long enough to pay off
When it comes time to buy a house, make sure you are buying the house that you can afford. Calculate how long it will take to pay off the house and make sure that you plan on living in the area for that long. Realtors will get you with the statement "the mortgage payment will be less than your rent payment" or "renting is like throwing your money away". In a way, I completely agree. But, on the other hand, usually that mortgage payment is based on a 30 year or more mortgage. If you don't see yourself living there for 30 years, don't buy into this option. Dave Ramsey preaches to never sign more than a 15 year mortgage. If you have no other debts to pay, you may be able to pay the house off even earlier than that. If you plan on living somewhere for 12 years for example, try to pay off the house in 12 years. This will give you a paid off house to choose whether to stay in the same spot and accumulate more wealth, or move somewhere new, sell the house in full and use that money towards your next mortgage. It could also potentially set you up with a rental property to accrue almost passive income in the future.Golden Rule: Live below your means and save the surplus
At the end of the day, the golden rule will always be to live below your means. This means that you want to be bringing in more than you are spending. You could be making $30k a year and eventually become a millionaire if you are able to live below your means. You could also be stagnate or at a loss while making $150k a year if you are spending $150k a year or more. Living with this lifestyle will set you up for all future posts and will set you up for a safe and successful future.
Be on the lookout for future posts. I will be posting more about my principles and what has led me to the position I am in today as well as the principles I am using to give myself a bright future. Feel free to reach out with any topic requests or questions. I will be happy to try to answer any that I can. I will also be addressing the influences that I have learned from like Dave Ramsey and Millennial Millionaire etc. It is not meant to be an Ad or a bash, it is just a building block of my foundation.
-TwentyFrugal
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