I’ve noticed that my post on how Gen Y is with money continues to pick up a fair amount of traffic, with some of the comments on the post or e-mails to me giving their own answers as to whether Gen Y is good or bad with money. I’m pretty sure there’s never going to be one blanket answer—or that I’m never going to be able to figure it out. And I guess I don’t really care!
For me, there’s no doubt that, just like every other generation, there are particular members of Gen Y who are good with money. And just like with every other generation, we should collectively try to get more people to that same state.
So I thought I’d try and find some examples for inspiration, motivation, and emulation.
CNNMoney brings us the story of Jessica Nixon. Nixon is an electrical engineer in Dallas, Texas, earning about $60,000 a year (at least at the time of the article). By age 23, she had already saved up $69,000—$49,000 for retirement and $20,000 in a fund ear-marked for a house and a new boat.
How did she do it (and how is she presumably still doing it)?
- She saves 10% of her pre-tax salary into her 401(k)—and gains a 4% match from her employer. That comes to about $8,400 a year.
- She maxes out her Roth IRA contributions each year. Looking at the 2006-2007 limits, that comes to about $4,000 a year.
- After paying her rent and day-to-day expenses, she moves the rest of her paycheck into an online savings account.
- When she gets a bonus or tax refund, she saves 80% of it.
- She tries to save money by cooking at home, bringing her own lunch to work, and buying groceries on sale and with coupons. When she bought a mountain bike, she went with a used one.
- She manages her debt. She does not carry a credit-card balance and pays down other loans aggressively. For example, she paid off her car in 2 years (though the loan term was 5 years).
Hmm. When I was 23, I had heavy student loans, I had bad habits that led to heavy credit-card debt, and I probably didn’t know what an IRA was.
What about you? How were you doing at 23—and are you a Gen Y-er or do you know of other Gen Y-ers off to such a great start?
Related Posts:
Gen Y is Stupid, Smart, Lazy, and Diligent About Money
That Nagging Feeling I’m Being Stupid — Sticking With Stocks
By 23 I was in a similar situation to her.
It really helped however that I didn't have to pay for Uni, unfortunately these days (in the UK) everyone pays and student debts are becoming the norm - which puts everyone off to a bad start.
John, I'm Irish and so didn't pay any university fees either (they're taxpayer paid over there). It's true that this gives you an enormous number of choices and a great start in life.
Sure, I know plenty. They went to college on the Bank of Daddy. Bank of Daddy bought their car, and maybe their insurance the first couple years.
Works great for her, but most of us had piles of student loans. And most who went the Bank of Daddy route don't brag in CNN about how smart they are.
So so. At 23 (2 years ago), I had about 20,000 in student debt loans. Not too bad considering it included graduate school. I had just started my first job and was in the process of learning how far my salary went - not very.
I spent a lot of money that year- on furniture and kitchen stuff for my apartment (important purchases that I don't regret at all), an irresponsible long-distance boyfriend, a professional wardrobe (also good), a new car that I shouldn't have bought, especially not new.
Luckily, I avoided incurring credit card debt. Instead, I depleted some of the money that had been lying in my checking account since high school. I started contributing 10% of my salary to my company 401(k) account.
About the woman in the article - that's really amazing - I don't think there's anyway I would have 69k by the time I'm 33. I'm going to try though!
@dogatemyfinances: Care to read the article before making snide remarks about the subject?
"Nixon also got head start on many of her peers by graduating from college completely debt free, earning a full academic scholarship."
hmm yup. when I just turned 23 I was in a similar situation as her. My job paid a bit more back then, $72k. Like John said it really helps to not have any student loans. I went to a public school and got a scholarship so it's not that bad. By the time I turned 24 I had around $130k in all assets. This was all before I got married. So I think pretty much all of my friends working in tech can save that much. I told one of my friends about how I saved and he was able to save $75k in a year and now he's taking some time off to travel the world. I'm so jealous.
I have to admit that I find her amazing! I graduated from undergrad without any loans (scholarships). I purchased a used car and racked up about $1k of credit card debt. I'm currently debt free, but it took a while. I also took a while to find a job in my field.
I still had no clue about money by that age. I just got my first job and was spending fairly frivolously because of it.
It took me till 25 and some change (and a baby on the way) that I decided to start taking it serious. :)
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