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).
It sounds like Nixon started off with at least some financial grounding from her father—and she started investing in high school, buying blue-chip stocks like General Electric. And she started off on a great footing by earning a full academic scholarship for college and graduating debt-free.
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?