5 Simple Money Moves You Should Make Right Now

Politics, money, and sex… the three things we have been conditioned to never talk about, yet they are three topics that permeate our daily lives the most.

5 Simple Money Moves You Should Make Right Now
Photo by Micheile Henderson on Unsplash

Personal finance was something my parents and my high school never discussed with me. So, once I was thrown into the world of “adulting”, it would be an understatement to say that I was lost. Here are 5 financial moves I wish I would have made sooner.

1. Open a Roth IRA

You’re young. You’re carefree. You’re likely living paycheck-to-paycheck. Why would investing in retirement even be on your radar? The sad truth is most people in their 20’s aren’t thinking enough about their retirement. Our grandparents, and maybe even our parents, didn’t invest into a personal retirement account because they were banking on Social Security being enough to take care of them once they retired. We don’t have that luxury.

The reason you should start investing today and not tomorrow or next month or next year is compound interest. The longer you let your money gain interest, the more money you will make doing nothing. Check this math. Let’s say you invest one dollar a day (or $365 a year) for the next 20 years with an annual interest rate of 6%. Your $7,300 investment will be worth just over $14,200 at the end of 2040. Compare that to waiting 10 years but doubling your investment to $730 a year for 10 years. Your same $7,300 investment would only be worth just over $10,000 at the end of 2040. See why you should start RIGHT now?

The reason you should open a Roth IRA instead of a traditional IRA is because, with a Roth IRA, your money is taxed before you put it into your account. This means that you won’t have to pay taxes later when you withdraw it. It’s essentially a double gift that you are giving to yourself. Talk about self-love.

There are some restrictions and limits to opening a Roth IRA, but as long as you have some kind of earned income (even if it’s part-time or seasonal) and make less than $120,000 a year, you should be good to go.

A few options for Roth IRAs that are simple and insured: Fidelity, Charles Schwab, and Merrill Edge.

2. Get a Credit Card

You need a credit score for so many things… buying a car, getting a student loan, and sometimes even renting an apartment. You could always have your parent co-sign to get around that obstacle, but the sooner you stop relying on the Bank of Mom and Dad, the better. The one flaw in the building a credit score system is that you need a credit card to really build your credit, but if you don’t have a credit score, it’s very unlikely that you’ll get approved for a credit card. Crazy, right?

A simple way to get your foot in the door is to get an unsecured credit card. The difference between a more traditional secured credit card and an unsecured credit card that makes it easy for someone without a credit score to get approved is that you pay a deposit for an unsecured credit card as collateral. For example, you pay a $50 deposit for an unsecured credit card, and in return, you get a $250 credit limit. If you make all your payments on time for 5 months, your credit limit will get bumped up to $500.

The biggest keys to building a credit score are on-time payments, age of oldest credit line, percent of credit used, inquiries within the last 2 years, the number of new accounts within the last 2 years, and the amount of available credit you have. With those keys in mind, here is the simplest way to get your credit score to skyrocket. Get one unsecured credit card (a good option is Capital One’s Unsecured Platinum card) and then forget about it for two years.

Hear me out. If you have no payment to make when your due date comes around, it counts as an on-time payment. If you aren’t using your credit card, your percent of credit used will be 0% (a 0% in this instance is like getting in an A+). If you only open the one account, your inquiries and your new accounts will both only be at a 1 for the next two years. With those 4 keys alone, you will build your credit score. After the 2 years is up and your inquiries and new accounts drop to 0, you will begin to receive credit card offers from traditional secured credit card companies. These more traditional credit cards will allow for you to have a higher amount of available credit. My two big warnings:

(1) Do your research and only apply for one of the offers you receive. You don’t want your inquires and your new account numbers to go beyond 2 or 3.

(2) Do NOT close your unsecured card account!! One of the keys to building your credit score is the age of your oldest line of credit. You don’t want to lose those two years that you’ve banked.

3. Put Your Savings into An Online Savings Account

Traditional savings accounts that go along with your checking account at brick and mortar banks is a rip-off, plain and simple. Your average brick and mortar bank offers an interest rate of 0.01%, which means if you save $100, you will earn a penny. You’d make more money picking up change on the sidewalk.

Online savings account offer a way better deal of around 1.5%*. So that $100 investment will earn you $1.50. Online savings accounts aren’t going to make you rich, but if your money is already doing nothing, $1.50 in passive income is a way better deal than a penny.

A few options for online savings accounts with historically high yields: Marcus by Goldman Sachs, Barclays, and Ally bank.

*Interest rates on savings account are currently at a historic low at the time of writing this, so this number may not be what is currently reflected.

4. Open an Emergency Fund and Automate It

If you only take one piece of advice from this entire article, let it be this: open an emergency fund. Emergencies happen ALL OF THE TIME. Your car could break down, you could break a bone, someone could break into your apartment, etc., and the last thing that you need to be is financially unprepared. A good starting goal is to have a $1000 put away. Once you have successfully put that much away, aim for one-month worth of expenses. Rent, insurance, car payments, utilities, groceries… whatever your expense are, know that number, and make it your goal. Then once you have hit that goal, try for 3 months’ worth of expenses.

If you’re someone that tends to be on autopilot for all things finance, you need to automate your savings to ensure that you are putting money towards that emergency fund. You don’t have to invest huge chunks of money to make a difference either. You could set it up so $30 a month is put into your savings account. If that feels like too much, you could use the app Acorns to begin micro-savings. Acorns is linked to your debit and credit cards, so every time you make a purchase, Acorns rounds that purchase up and saves the difference. So, if you spend $4.32 at Starbucks, Acorns will automatically round that purchase up to $5 and save that $0.68 into your account.

The smallest investments in yourself will make a difference.

5. Stay Informed/Do Your Research

Being financially informed is crucial. Now, I am not saying you need to major in economics or obsess over the stock market, but I am saying that you owe it to yourself to be knowledgeable. Becoming knowledgeable can happen in small doses. Listen to a podcast from time-to-time. Pick up a book about finances. Watch some YouTube videos.

If for some reason watching paint dry sounds more fun than staying consistently informed financially, please at least do some research before you make any big money moves. Research your loan options for graduate school before signing anything. Shop around before choosing your car insurance. Ask questions if you don’t understand the benefits package your employer offers.

Podcasts to check out: Snacks Daily by Robinhood; Planet Money by NPR; or Marketplace.

Books: Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner

YouTube: Graham Stephan, Nic Palladino, or Andrei Jikh

Disclaimer: I am not certified to give investment advice. Everything I have suggested are things that I have done in my personal life. What I have chose to do may not be the best decisions for you. In addition, I am not sponsored by any account, app, book, or person that I suggested.

personal finance
Jamie Cranmer
Jamie Cranmer
Jamie Cranmer

Hi! My name is Jamie. I am a plant-based graduate student who is obsessed with coffee, NPR, and traveling. I am currently figuring out how to best survive and thrive in my 20's.

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