Joseph Shalom
After graduating college young professionals enter the workforce at the most opportune time to begin saving for their future. With the right plan in place, and educated financial decisions, you can set yourself up for future financial success.
My personal story doesn’t differ from most in our community. After graduating college in 2015, my life was filled with a lot of new experiences. I had my first serious girlfriend. With my entry into the workforce, I suddenly was making my own money. I was also tasked with taking ownership of my financial life, something which can have ramifications far beyond the short sighted mindset of the average 22-year-old. I credit my grandparents with instilling in me an innate responsibility when it comes to money management. From a young age, they would say to me, “if you gave me a dollar I would come back with two.” While not your standard 4th grade pitgam (proverb), it became a part of my everyday lifestyle.
Of course I was not alone in traversing this landscape of firsts. Most of my contemporaries were in the same boat. Regardless, I noticed that many of us were living very different lifestyles, which don’t always align with perceived wealth or lack thereof. There is so much temptation when we are young. Having a growing bank account with relatively low living expenses is a recipe to living life to the fullest.
– I can splurge on the sports edition, it’s just a few hundred more per month.
– Why not stay at the most expensive hotel? We already spent so much on flights.
– Mom made spanech (spinach pie) with rice and lentils? Let’s go out to eat again, even if we did that last night.
What I began to realize then, which has only been reinforced through my years working as a financial advisor, is that the most valuable, and easiest time to save money, is when we first begin our career. There are three critical topics, which when implemented correctly, can help you take that first important step forward:
Change Your Attitude!
What’s the point of making money, if you can’t spend it? As an advisor, we learn that there is no one size fits all algorithm to what one should or shouldn’t spend money on. My goal is not to tell you to cut out all luxuries and save every penny until you retire at 65, and start collecting social security. The Instagram and TikTok influencers tell us to make lunch at home and brew your own coffee to work. That’s a great start when one is looking to budget, but that’s not everyone’s goal. I live by the philosophy of “Pay yourself first.” It is imperative that from a young age, everyone begins to set some savings aside every month. An easy way to do this, is to pick a set percentage of your salary every month, and automatically transfer it into an investment account. Consistency is key, and vital to the overall success of your plan. Just as you pay rent, or a car bill, so too should you be funding your investments. Find the number that works within your lifestyle and stick to it, thereby setting yourself up for a successful future.
Start Early and Be Aggressive!
It is a common thought among the younger generation, that one won’t be able to save early, as easily as they will be able to in the future when one typically makes more money. Getting a head start will be a huge favor to future you, especially when we utilize the power of compound interest.
Take a look at the following example:
At age 25, Sarah started transferring $500 a month into her investment account. Sarah was consistent, and stuck to her plan, continuing to transfer $500 every single month, in good times and bad, through age 65. Assuming a 7% rate of return on her investments, by the time Sarah turns 65, her account has $2,300,000. Not too shabby.
But what if Sarah just waited a little longer, when her life was more stable. If Sarah didn’t initiate her plan until age 35, but invested that same $500 per month, with the same 7% rate of return, now her account would have $1,200,000.
By starting her plan 10 years earlier, 25-year-old Sarah invested an additional $60,000, but when she reaches age 65, her investment account has an additional $1,100,000.
Your Most Important Vehicle is an Investment Vehicle!
People always ask me, “Joe, where do I start?”
There really are so many different types of accounts and investment vehicles, that it can be overwhelming choosing what’s best for you. What your best friend or brother does is not necessarily the right choice for what works in your life. Investors have the opportunity to utilize different types of accounts, based on their personal needs. Individual brokerage accounts are great for flexibility. Retirement accounts, like IRAs and 401(k)s, offer unique tax advantages. Custodial accounts are set up for minors. Each specific vehicle serves specific financial goals and strategies. The first step is thinking about what YOUR goals are, and making a decision based on your unique circumstances.
When making major, impactful life decisions, most people talk to others for advice and feedback. Your financial life is no different, and that’s where working with a financial advisor can help. Talking to someone experienced, who has seen community members in similar circumstances, can help you understand what works best in the framework of your life. An advisor can provide valuable insight to help you plan around your goals and timelines, and how to structure each investment. q
Registered representative of, and securities and investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member FINRA/SIPC, 800-873-7637, www.htk.com. Power Forward Group is unaffiliated with HTK. HTK does not offer tax or legal advice. Always consult a qualified adviser regarding your individual circumstances. For Educational Purposes Only – Not to be relied upon as financial, tax, or legal advice. The hypothetical example is used for illustrative purposes only and is not representative of actual results. Any assumptions as to interest rates, rates of return, inflation, or other values are hypothetical and for illustrative purposes only. 7354537RG_Nov26
Joe Shalom began his career at his family’s wholesale business, working to optimize efficiencies in their operations and increase profitability. Looking to pave his own path, Joe made the difficult decision to leave the family business and start a career as a Financial Advisor. Joe’s goal is to help young professionals, families and small businesses optimize their financial lives. Over the past 5 years, Joe has been able to help hundreds of individuals across the country build financial plans to achieve their long term goals.
