Early Career Financial Journey
According to many studies, US consumers score poorly in financial literacy tests. Those low average scores persist across age, sex, and income with the best average scores in the 60% range. That’s a failing grade.
Not understanding how to make an informed early career financial decision puts you at risk of losing time and opportunity to build the financial resources you’ll need. Financial mistakes may create stress and a rockier road which you should try to avoid.
How financially literate are you compared to the average American? You can take one of the shortest of those financial literacy quizzes here (it’s only 6 questions) to get a taste of the questions asked.
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Get a Head Start on Your Early Career Financial Journey
Gathering the information you need and asking the right questions may help you make more informed financial decisions. That’s one reason you’re here at MyStages®–to become a more informed financial consumer. Isn’t it?
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First-Timer Decisions
If you’re like many young Americans, you’ve started earning. That means you may be in a position to . . .
- Start building your credit
- Rent/Buy a house/apartment
- Set a date to retire as a goal
- Start building your wealth
- Pay off debt
Each of these early career financial goals takes financial planning. That’s because money doesn’t come with instructions. Your financial goals require understanding and effort, perhaps more than you think.
Your First Job and First Financial Decisions
Here you are beginning your first job. It may even be your first day of your first job when you are asked if you would like to participate in your employer’s retirement plan. Will you? Should you? What percentage of your pay should you contribute? These are questions you may not be prepared to answer when asked.
If you work for an employer with at least 5,000 employees, there’s a 98% chance that employer offers a retirement plan. The smaller the company (by number of employees), the lower the chance the employer offers such a plan. If your employer does not offer a retirement plan, you can always open your own retirement account, such as an IRA or use another strategy.
This first early career financial decision–which could become your largest lifetime financial asset–may be trickier than you think. Here’s why.
Paycheck Deductions Without Instructions?
Other than at enrollment, your employer’s retirement plan does not come with long term instructions or a financial advisor to help you. That’s because the financial advisor works for the plan (your employer), not for you.
You will likely meet that financial advisor during your first day at work (or soon thereafter). The purpose of that meeting will be to help you enroll in the employer’s plan, to determine your general tolerance level for investment risk, and to choose investments based on your risk profile. But that may be the last time you see that financial advisor–ever.
Will you be on track to retire? Will you understand your investments when you look at your account? Are you missing any opportunities? You will need to make an effort to find answers to all of these questions because they may not be forthcoming automatically through the employer’s plan.
That’s one example of a major and very common financial decision that may not provide all of the help you need. You could easily land up making paycheck deductions toward your retirement account without instructions for many, many years. You may never be able to retire that way. That’s why financial planning needs to be part of your financial life.
You will work hard to earn your money. The question is this: will your money work as hard for you as you work for it? The same way you have a supervisor to help you do your job well, your money needs supervision to do its job well.
REMEMBER
The EMILY rule. Early money is like yeast.
Like it or not, you’re in the money management business, managing your money. If you multiply how much you anticipate earning this year by the number of years you anticipate working until you retire, you’ll see a large number. That’s exciting. It’s also powerful. You’ll need a strategy to manage your lifetime earning power so it accrues to your benefit.