This is part four in a series of posts describing my Financial Journey. Part one can be found here. Inspiration for this series came from the Road to Financial Armageddon series over at The Simple Dollar.
My first job out of college was 2,141 miles from home. I was thankful that my company moved my belongings out west to Seattle for me, but right before I was about to leave on my trip, my 1990 Buick Park Avenue essentially died on me. Within a day I bought a used 2004 Toyota Camry through a personal family loan that has been a great investment for me. I have learned that buying a reliable car with great gas mileage is even more important when you are first starting out after college. Going into debt right away to drive a flashy new car is not the best step to take towards a strong financial future.
When I moved west, the apartment search was all in my hands. My first step into adulthood meant signing a 12 month lease on an apartment when I had barely any money to my name and a pile of student loans in tow. My search for an apartment took mere hours (something I regret) and I chose the most expensive place I saw. Why? Because it was the nicest I had seen and I “deserved” it.
Before looking for an apartment I didn’t set a budget to see how much I should spend on housing. I didn’t worry about how far it was from my job, which meant my commute ended up being 30 minutes each way when there were almost identical apartments five minutes from work. If I were to do my apartment search again I would have looked for something closer to work, cheaper and no more space than I needed. Throughout college I shared a tiny dorm room with another person for four years. I could have easily gotten by with just a studio apartment or a mother-in-law apartment. The best advice I can give for someone graduating college is to live the first few years after graduation like you are still in college. You will save a lot of money.
At several points throughout the year there was more work to be done at my job than usual. I worked a lot of overtime. I am grateful that I was able to earn more money this way, but I didn’t put the money to good use. I squandered the majority of it on purchasing electronics. This habit continued for two years! I looked at the money differently because it was above and beyond my regular income. I treated it like a gift for my extra work. While I should have let myself use some of it for personal spending, I also should have immediately put it towards paying off my car, my student loans, or building an emergency fund. While I eventually learned the lesson that all money is still money, no matter how you earn it, I spent a lot of my overtime pay haphazardly.
Because I went back to work at the same company I interned for in college I received a two part stipend towards the tuition of my senior year of college. I was thankfully more responsible with this than I was with my overtime pay. Immediately upon receiving these stipends I sent all of them towards paying off my car. I paid off my car within one year and the feeling of not having car payments or debt overhead is a great feeling.
For retirement savings I began contributing 8% (with a 6% company match) towards my 401k. I researched which funds were the best for me to invest in at my age and looked specifically at funds with the lowest fees, as this can eat up a lot of growth. I also used part of my education stipend to maximize a Roth IRA at $5,000 a year. By starting immediately with these two investments I set the precedent that I would be saving first and spending second. It is important to set these up as early as possible for a number of reasons. If you never see the money in the first place you won’t miss it when you start contributing. Next, the sooner you start investing the more time you allow for compound interest to help your money grow. Furthermore, making the investing automatic will make your life easier.
The last financial related decision I made after starting my job was to start graduate school. I started an evening MBA program at a university close to my job and I’m glad I did. One of the biggest reasons I started the program was that my job assisted in paying for a large portion of the program. I was able to make it through grad school without taking any loans or accumulating any debt, due to still working my full-time job at the same time. You always hear that going back to school is hard, but it didn’t feel that way, it felt more like I had never left. I was fresh out of undergrad, so I was used to being in class, doing homework and meeting with groups. I did not yet have a family or other responsibilities that would be pulling me away from work and school. Lastly, I had plenty of free time on the nights and weekends because I hadn’t met many new friends in the area, and I even met some of my current close friends through the program.
One caveat to this post: I spent a lot of time in college focused on finding a job after I graduated. While what I wanted to do changed quite a few times, I made sure that I had something lined up when I got the diploma handed to me. That being said, it was easier for me in early 2008 to find a job than it was even six months later or now with the economic downturn the world is currently in. Had I not landed my first job and been able to set a financial foundation, this part of the story would be entirely different.
While I had some irresponsible financial decisions in the beginnings of my first job, I was headed in the right direction in a lot of areas. Tomorrow, in the last post of this series, I will describe my current financial state.