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Article from WSJ online - saving and 20s

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MegZee
My bunny

Member since 5/06

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Meaghan

Article from WSJ online - saving and 20s

Keeping Your Financial Footing So You Can Buy That House in Your 30s

By Jonathan Clements
The Wall Street Journal Online
First, do no harm.

As soon as you graduate and land a job, you are supposed to move quickly to build up an emergency reserve, buy a house, fund your employer's 401(k) plan and open an individual retirement account. Worthy goals? Certainly. Realistic? I don't think so.

My advice: If you're just out of school, don't worry too much about saving for retirement and buying a house -- and instead strive mightily to stay out of debt.

• Piling up trouble. I am not saying all debt is bad, and I am not arguing that folks in their 20s, if they have the money, shouldn't purchase homes and fund 401(k)s.
But it strikes me that, for most of us, our initial working years are about learning to live within our means, pay the bills on time and stay out of financial trouble. How do you know you are succeeding? If you aren't piling up credit-card debt and taking on big auto loans, you're probably on the right track.

Make no mistake: Debt is a big issue for folks in their 20s. According to the College Board, an association of schools, colleges and universities, 73% of graduates from four-year nonprofit private colleges had student loans outstanding, with $19,400 typically owed.

Once kids get into the work force, this debt can cause a heap of financial stress. New York's AllianceBernstein Investments recently surveyed college graduates between ages 21 and 35. Among those who graduated with debt, 42% said they were now living paycheck to paycheck, versus 24% of those who graduated debt-free.

And the problem isn't just caused by student loans. Almost a quarter of undergraduates have credit-card balances of $3,000 or more, according to a study by Nellie Mae, the college lender in Braintree, Mass. After graduation, those credit-card balances can easily balloon, as kids struggle to get by on skimpy paychecks. Tack on a car loan or lease and you could be looking at big trouble.

To be sure, adults under age 35 are carrying less debt than folks in their 40s and 50s. But they also have smaller paychecks, so meeting their monthly obligations can be tough.

Consider some data from the Federal Reserve's 2004 Survey of Consumer Finances. The Fed asked families with debt whether they had been at least 60 days behind on any of their payments over the prior year. The answer was "yes" for 13.7% of households headed by someone under age 35, up from 8.7% in 1995. Older adults, by contrast, were less likely to report difficulty making their debt payments.

Staying in shape. With any luck, your post-college financial struggles will ease as you approach age 30 and start getting some decent salary increases.
Indeed, this is when you should be looking to buy your first home and start seriously saving for retirement. And, no, you won't be late to the party.

The typical first-time home buyer is age 32, according to the National Association of Realtors, based in Chicago. Similarly, surveys by the Investment Company Institute in Washington suggest people typically start investing in mutual funds in their late 20s or early 30s, with their first investments often made through 401(k) or similar employer-sponsored retirement plans.

But if you're going to buy the house and start funding the 401(k) in your late 20s or early 30s, you've got to reach that age in reasonable financial shape. What does it take? Here are five tips.

Don't expect to live like your parents. It took them 25 or 30 years in the work force to achieve their current standard of living. If you're eating out as often as they do or taking equally extravagant vacations, you're probably spending too much.
• By leasing or borrowing, you could likely drive a car that's almost as fancy as your parents'. Moreover, the tab might seem pretty manageable, with a 48-month $20,000 auto loan costing maybe $480 a month.

Problem is, you will be setting yourself up for big insurance bills and you will be lavishing all this money on a depreciating asset. A better strategy: Buy the clunker -- and put the $480 a month toward a house down payment.

• Handle credit cards with care. I aim to put everything on my debit card, partly because I get cash back on my purchases. Using a debit card also makes me a more careful spender, because I know the money is coming straight out of my checking account.


What if you prefer to use a credit card because you earn, say, frequent-flier miles? Try this trick: Every time you use your card, subtract the sum from your checking-account balance. That way, when the monthly credit-card bill arrives, you know you will have enough to pay off the entire bill.

While carrying a credit-card balance is foolish, don't necessarily rush to pay off student loans. The interest rate may not be that steep, and the interest should be tax-deductible. Instead, if you have spare cash, put enough in your employer's retirement plan to get the full matching contribution and then earmark the rest for a house down payment.
• Mooch off Mom and Dad. Moving home for a few years after college may crimp your lifestyle, but it should also bolster your bank balance.

In fact, make sure your parents know just how thrifty you are. Maybe that will elicit some parental admiration -- and maybe also a little help with the down payment on your future abode.

Posted 8/8/06 11:45 AM
 
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Beth
The Key to your new home....

Member since 2/06

24849 total posts

Name:
Beth

Re: Article from WSJ online - saving and 20s

that about sums up my 20's- on top on the fact that I was a bar tender making over $1K- $1500K a week cash- then got a "real" job making $1,050 every 2 weeks- moved to the city- and continuted to spend like I was making $1K to $1500 a week

now that a make alot more money- I am paying for the 2 years I lived in city

while it was fun and I am glad I had the experince- but since I moved to the city and wound up dating someone I went to HS with- so I really could have stayed home and saved- but you live - you learn- I will be debt free by my 30 b-day b/c of Jake's help


Posted 8/8/06 12:09 PM
 

lululu
LIF Adult

Member since 7/05

9511 total posts

Name:

Re: Article from WSJ online - saving and 20s

This article makes a lot of good points - however i doubt you could convince most college seniors/early grads to live by it! Sometimes you just have to live and learn.


Posted 8/8/06 12:49 PM
 

MegZee
My bunny

Member since 5/06

8777 total posts

Name:
Meaghan

Re: Article from WSJ online - saving and 20s

IDK - I did. I didnt go away to school and I could have moved out when I graduated but instead I stayed home and paid off my undergrad student loan.

but, i bought myself a new car, lol. but I have no CC debt so Im not so bad!

Posted 8/8/06 12:54 PM
 

lululu
LIF Adult

Member since 7/05

9511 total posts

Name:

Re: Article from WSJ online - saving and 20s

What is IDK?

I think you are on the right track - and you know what sometimes you have to splurge a little. I think that if you stayed home for school and still live at home, you deserve a nice, new car at the very least!!!

Posted 8/8/06 1:09 PM
 

JandJ1224

Member since 6/06

5911 total posts

Name:
Jannette

Re: Article from WSJ online - saving and 20s

I am 23 and I'm not really sure how I feel about this artcle. I have no cc debt. I do have a lot of student loan debt and a car loan. I agree it would have been smarter to not buy a new car right away, my car insurance is almost as much as my car payment each month!! I am eager to start saving for a house though and I can't see myself waiting till I'm in my 30's...

Posted 8/8/06 1:16 PM
 

MrsSchwags
Soccer Baseball Lax Mom

Member since 10/05

11240 total posts

Name:
Jennifer

Re: Article from WSJ online - saving and 20s

I have it all. A little bit of CC debt, not a crazy amount, student loans, car payments and a mortgage.

We are just starting our life. My DH has a good job and after the baby I will have a decent one also.

We understand what we got ourselves into and we are fully aware of the risks, but we are willing to work them out and enjoy what we have.

Posted 8/8/06 1:27 PM
 

MegZee
My bunny

Member since 5/06

8777 total posts

Name:
Meaghan

Re: Article from WSJ online - saving and 20s

IDK = I dont know

lol and I agree - i deserved that car!!

Message edited 8/8/2006 2:00:43 PM.

Posted 8/8/06 2:00 PM
 

lululu
LIF Adult

Member since 7/05

9511 total posts

Name:

Re: Article from WSJ online - saving and 20s

Posted by Meaghan729

IDK = I dont know

lol and I agree - i deserved that car!!




I am clueless!!! Thank you!

Posted 8/8/06 2:12 PM
 

2Pisces
Life Coach

Member since 2/06

3337 total posts

Name:
Paige

Re: Article from WSJ online - saving and 20s

Posted by MrsSchwags

I have it all. A little bit of CC debt, not a crazy amount, student loans, car payments and a mortgage.

We do too.....Except Michael has no student loans, so that is nice. We are just hoping to steadily save and pay down our CC's, etc. and eventually live nicely wothout the CC debt. It is so annoying every month. Chat Icon


Has anyone seen Oprah's debt diet....I think its great fro people in little debt and people in huge debt. I think it works. Chat Icon

Posted 8/8/06 8:31 PM
 

MrsSchwags
Soccer Baseball Lax Mom

Member since 10/05

11240 total posts

Name:
Jennifer

Re: Article from WSJ online - saving and 20s

what's oprah's debt diet??

Posted 8/8/06 9:13 PM
 

Freddie
LIF Adult

Member since 3/06

1162 total posts

Name:
Freddie

Re: Article from WSJ online - saving and 20s

Posted by lululu
Sometimes you just have to live and learn.




I think some people definitely learn this way!



One thing that upsets me:
Make no mistake: Debt is a big issue for folks in their 20s. According to the College Board, an association of schools, colleges and universities, 73% of graduates from four-year nonprofit private colleges had student loans outstanding, with $19,400 typically owed.



Why do colleges and universities, knowing this, allow credit card companies to come onto campus and entice the financially immature with candy bars, T-shirts and other useless items? It's a diservice to the students they are trying to educate.

Posted 8/9/06 9:03 AM
 

lululu
LIF Adult

Member since 7/05

9511 total posts

Name:

Re: Article from WSJ online - saving and 20s

Posted by Ricki

Posted by lululu
Sometimes you just have to live and learn.




I think some people definitely learn this way!



One thing that upsets me:
Make no mistake: Debt is a big issue for folks in their 20s. According to the College Board, an association of schools, colleges and universities, 73% of graduates from four-year nonprofit private colleges had student loans outstanding, with $19,400 typically owed.



Why do colleges and universities, knowing this, allow credit card companies to come onto campus and entice the financially immature with candy bars, T-shirts and other useless items? It's a diservice to the students they are trying to educate.



I was going to post the same exact thing yesterday. Schools should not allow credit card companies on campus.

Posted 8/9/06 9:09 AM
 

Beth
The Key to your new home....

Member since 2/06

24849 total posts

Name:
Beth

Re: Article from WSJ online - saving and 20s

Posted by lululu

Posted by Ricki

Posted by lululu
Sometimes you just have to live and learn.




I think some people definitely learn this way!



One thing that upsets me:
Make no mistake: Debt is a big issue for folks in their 20s. According to the College Board, an association of schools, colleges and universities, 73% of graduates from four-year nonprofit private colleges had student loans outstanding, with $19,400 typically owed.



Why do colleges and universities, knowing this, allow credit card companies to come onto campus and entice the financially immature with candy bars, T-shirts and other useless items? It's a diservice to the students they are trying to educate.



I was going to post the same exact thing yesterday. Schools should not allow credit card companies on campus.




they got me- that's how I got into this mess- but I went to a state school

do private schools allow this- b/c both my brother and sister went to private colleges and neither one of them got a credit card a week like me

Posted 8/9/06 9:17 AM
 

MegZee
My bunny

Member since 5/06

8777 total posts

Name:
Meaghan

Re: Article from WSJ online - saving and 20s

Posted by Beth1210

Posted by lululu

Posted by Ricki

Posted by lululu
Sometimes you just have to live and learn.




I think some people definitely learn this way!



One thing that upsets me:
Make no mistake: Debt is a big issue for folks in their 20s. According to the College Board, an association of schools, colleges and universities, 73% of graduates from four-year nonprofit private colleges had student loans outstanding, with $19,400 typically owed.



Why do colleges and universities, knowing this, allow credit card companies to come onto campus and entice the financially immature with candy bars, T-shirts and other useless items? It's a diservice to the students they are trying to educate.



I was going to post the same exact thing yesterday. Schools should not allow credit card companies on campus.




they got me- that's how I got into this mess- but I went to a state school

do private schools allow this- b/c both my brother and sister went to private colleges and neither one of them got a credit card a week like me



I went to Hofstra and during the first week of class every semester they have the MBNA table set up in the student center. They give you a free shirt, so they rope alot of people in!

Posted 8/9/06 9:18 AM
 

~Colleen~
my loves...

Member since 5/05

9129 total posts

Name:
guess

Re: Article from WSJ online - saving and 20s

Posted by Beth1210
do private schools allow this- b/c both my brother and sister went to private colleges and neither one of them got a credit card a week like me


Yes, at least they did when I went.

Posted 8/9/06 9:19 AM
 

lululu
LIF Adult

Member since 7/05

9511 total posts

Name:

Re: Article from WSJ online - saving and 20s

Posted by Colleen9304

Posted by Beth1210
do private schools allow this- b/c both my brother and sister went to private colleges and neither one of them got a credit card a week like me


Yes, at least they did when I went.



I went to a private school and I believe they only let MBNA come on campus at the time (this was YEARS ago though). i also graduated with about $1000 in CC debt, which all things considered is not that bad but having a credit card when I didnt understand the responsibility of it was a bad bad bad thing.

Posted 8/9/06 9:24 AM
 

Jax430
Hi!

Member since 5/05

18919 total posts

Name:
Jackie

Re: Article from WSJ online - saving and 20s

Based on this article, DH and I are right on target. We live in a one bedroom apt., don't have any debt and are slowly saving for a house in a couple of years.

As far as credit card companies on campus, I don't see the problem. I think college is a great time to start building good credit, as long as college kids are responsible about opening and maintaining accounts. In my four years in college, I think I only opened 2 accounts, despite all the enticing free giveaways. I guess I was also able to handle it b/c my parents taught me that I should never be putting more on my cards than I could pay that month. I never thought of it as extra money or anything.

Posted 8/9/06 3:49 PM
 
 

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