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Now that You’re Making Money

Congratulations! You’ve leapt from paycheck hopping to solid financial footing.

“Great! Now what?” you might ask. Since you’re used to pushing around dimes and nickels for a tube of toothpaste, it’s not surprising that long-term financial planning feels a little intimidating. To help you get your nose out of that pile of change so you can start thinking about the bigger picture, I’ve listed four important steps you’ll need for future financial stability.

Set up a rainy day fund: One of the most important financial habits to develop as you start investing in your future is to always be planning for the Unknown. Part of that plan needs to include a Freedom Fund for that dreaded day when Ol’ Bessie’s transmission dies, you open your fridge to find warm air and rotten veggies, or the boss calls you into his office to give you some—gulp—bad news.

This fund should have enough money in it to tide you over in a “worst case scenario”—usually about three to six months’ worth of salary. The most important thing about your Freedom Fund is its safety and accessibility, so it’s best to store it either in a bank that will pay you at least a little interest, or a money market fund at a reputable company that will accept an account of the size you’re investing.

If your employer offers a retirement plan at work, get on board: It’s hard to think about saving for your golden years now, but, the earlier you start, the easier it is.

A. If your company offers a company match, that’s free money! B. Start with 3-5% (or the company match) and you will be surprised at how painless it is when it comes out of your pay before taxes.

Outline your goals: Once your Freedom Fund is full, you can start to think about saving for some of your long-term goals. The catch is that to save for your future, you have to plan one, which means it’s really is time to get serious about outlining your goals.

Start by listing the goals that are most important to you, I’ve listed some common ones here, but you’ll have to do your own number crunching to figure out what that dream wedding will cost or how much the down payment on the Porsche will be. Looking at those numbers will give you a realistic idea of what your savings need to look like.

Schedule those goals, and match your investments accordingly: You don’t need a time and date, but put those goals on a general timeline. Maybe you want to go get another degree in the next two years, but buying your first house won’t be on your radar for another ten.

Now you can legitimately look at your savings goals and determine which one to start with, or start splitting your savings between several goals. Do you really make enough for the payments on a new car? How long will it be before you can make the down payment on a new home?

When you have a solid vision of your future, it’s easier to decide what to spend on now and what to save for later.

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