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I turn 27 this year. At the time of this writing, I have around $260,000 in assets across various investment accounts. I don\u2019t own a home; I rent one. I\u2019m getting married in a courthouse in three weeks from today, and man \u2013 the last five years since I graduated have taught me a lot<\/em>.<\/p>\n All things considered, I feel pretty good about where I\u2019ve ended up (so far).<\/p>\n That said, there are a few things I wish I could go back in time and tell my 21-year-old self, intercepting her on her way to the Louis Vuitton store after getting her first full-time job offer. Oh, to be young and obsessed with white leather handbags. <\/p>\n This post is intended for the post-graduate person just starting out in corporate America (or elsewhere) and determined to get off on the right foot. Please enjoy the self-ridicule along the way. <\/p>\n At the time, a starting salary of $52,000 made my head spin. <\/p>\n In fact, it spun so fast that the gravitational force carried me right to Northpark Mall and up to the Louis Vuitton counter. <\/p>\n Since I had never had a real<\/em> job before (only making $12 per hour as an intern), $52,000 felt like winning the lottery. I was a grown-ass woman with an INCOME, right?! I deserved to go out to lunch every day, shop every Saturday, and brunch every Sunday, right?<\/p>\n Wrong.<\/p>\n Oh, so very wrong. <\/p>\n I wish I had had some respect for how little $52,000 really is \u2013 not that it\u2019s a low salary; it\u2019s perfectly respectable. But to me, it might as well have been $252,000.<\/p>\n I didn\u2019t understand that only $43,000 would be coming home with me, after taxes. <\/p>\n I didn\u2019t understand that $10,764 of it every year would be going toward the roof over my head, leaving me about $32,000 per year to spend. <\/p>\n $32,000 sounds like a lot less money than $52,000, huh, KG?<\/p>\n More than anything, I didn\u2019t understand how important it was to recognize the power of my age:<\/p>\n When you\u2019re 21 years old with your first full-time income, you\u2019re a little bit like a plane leaving Los Angeles heading for New York (if Los Angeles is your 20s and early working years, and New York is your 50s and represents early retirement). <\/p>\n The smallest, seemingly insignificant changes can impact the trajectory of your entire life. <\/p>\n If you turn the nose of a plane leaving Los Angeles just a few feet to the right, you end up in Washington, D.C., not New York City. <\/p>\n That\u2019s 225 miles away \u2013 all because you turned the nose a couple feet at the start. <\/p>\n That\u2019s what being 21 is like. <\/p>\n I wish I could\u2019ve told myself, \u201cHey, KG, I know you\u2019re all excited about climbing the corporate ladder in 5-inch Louboutins now, but give it a few years \u2013 you\u2019ll realize what\u2019s really important to you, and that it\u2019s not being a corporate overlord. When that time comes, you\u2019re going to wish you hadn\u2019t spent every dollar you made \u2013 because, by the way, it\u2019s not enough to support the Real Housewives of Orange County lifestyle you\u2019re living<\/em>.\u201d<\/p>\n I would\u2019ve said, \u201cJust because there\u2019s money leftover in the checking account at the end of a long weekend doesn\u2019t mean you\u2019ve got a successful financial plan.\u201d<\/p>\n Hell, I didn\u2019t have a plan at all. My plan was to rack up charges on the Discover card all month, then hope by the time that the bill came due there\u2019d be enough money in checking to cover it (there always was, by the grace of God, but it came close sometimes).<\/p>\n So much of the first year of my working life was just comparing my income and decisions to my friends \u2013 I had no other yardstick against which to measure my success or failure. <\/p>\n The other people around my age at work who, I assumed, made around the same amount of money I did, were contributing between 5-8% to their 401(k)s. Our match was 9.3% dollar-for-dollar, so I never understood why they weren\u2019t taking full advantage of the free money situation \u2013 but when I\u2019d ask, they\u2019d say, \u201cEh, I need that money right now. I\u2019ll worry about retirement later.\u201d<\/p>\n At the time, that logic made sense \u2013 but I was a greedy Scrooge McDuck, so I still contributed 10% to a Roth 401(k). <\/p>\n I wish I would\u2019ve told myself that I should\u2019ve tried to max it out right away. <\/p>\n It sounds outrageous, but I think I could\u2019ve pulled it off if I had a spending plan in place. <\/p>\n I also would\u2019ve told myself this:<\/p>\n \u201cYou\u2019re contributing to a Roth because that\u2019s what everyone told you to do, but really, you\u2019re probably better off contributing to a Traditional right off the bat, collecting the tax savings, and investing the tax savings<\/em> in a Roth IRA.\u201d <\/p>\n I didn\u2019t know that a Traditional 401(k) meant I would defer income tax on up to $19,500 of income \u2013 or that the tax savings literally stayed in my pocket<\/em> and would\u2019ve been free to invest elsewhere, in something like a Roth IRA.<\/p>\n Because remember how I said about $43,000 of my income was mine after taxes? Had I contributed the maximum to my 401(k), my income after taxes would\u2019ve been $45,000 instead \u2013 giving me an extra $2,000 per year to invest somewhere else. <\/p>\n If I had maxed out my 401(k), my take-home pay would\u2019ve been $26,000 \u2013 more than enough to pay my $10,000 in rent and still have $16,000 (or $1,333\/month) left over to spend on whatever. <\/p>\n The fact that I could\u2019ve been maxing out my 401(k) for the last five years makes me want to kick myself, as this is the first year I\u2019m doing so<\/em>.<\/p>\n For a sense of scale, consider the fact that maxing out your 401(k) every year for 25 years<\/strong> will net you $1.3M if the market returns an average of 7% per year. That sounds like plenty of money, until you consider that $1.3M in 25 years from now is not the same thing as $1.3M today because of inflation. <\/p>\n The point? It won\u2019t be enough. Don\u2019t let your friends\u2019 lackluster saving and investing habits fool you into complacency or thinking that half-assing it will cut it. It won\u2019t. They\u2019re not going to have enough, either.<\/p>\n Which brings me to my third and final piece of wisdom for my 21-year-old self\u2026<\/p>\n\n
A full-time salary doesn\u2019t give you license to spend like a Kardashian, especially since it\u2019s only $52,000.<\/h2>\n<\/li>\n<\/ol>\n
2. Just because you\u2019re contributing more than your friends to your 401(k) doesn\u2019t mean you\u2019re contributing enough. <\/h2>\n
3. Be careful about inadvertently adopting money habits you don\u2019t want from your friends.<\/h2>\n