How are the best way to make and save money at 22 years old
I am currently 22 years old, I work as an insurance biller and make about 800-900 dollars every two weeks cash. I have no expenses because I still live with my parents but I'm trying to branch out on my own in the next year or so.
I was wondering at this stage of my life what would be the smartest thing to do for me, I know saving is a must I don't really have much saved as of right now but will defiantly start saving now.
What are some smart investments and things I can get into to make some money even if its a little bit?
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Determine how much you are going to save first. Then determine where you can spend your money. If you're living with your parents, try to build an emergency fund of six months income. The simplest way is to put half of your income in the emergency fund for a year.
Try to save at least 10% of your income for retirement. The earlier you start this, the longer you'll have to let the magic of compounding work on it. If your employer offers a 401k with a match, do that first. If not, consider an IRA. You probably want to do a Roth now (because you probably pay little in taxes so the deduction from a standard IRA won't help you).
After the year, you'll have an emergency fund. Work out how much money you'll need for rent, utilities, and groceries when you're on your own. Invest that in some way. Pay off student loans if you have any. Buy a car that you can keep a long time if you need one. Go to night school. Put any excess money in a savings account or mutual fund. This is money for doing things related to housing. Perhaps you'll need to buy a washer/dryer. Or pay a down payment on a mortgage eventually.
Saving this money now does two things: first, it gives you savings for when you need it; second, it keeps you from getting used to spending your entire paycheck. If you are used to only having 0 of spending cash out of each check, you will fit your spending into that. If you are used to spending 0 every two weeks, it will be hard to cut your spending to make room for rent, etc.
Get an education. A bachelor's degree preferably, but AA or even a certificate are fine too. It will increase your earning potential significantly and over your lifetime it will earn you a lot of money.
You make around ,000 a year now, median salary for someone with a bachelors in the humanities is around ,000. If you degree is in the STEM field, that goes up to ,000 - ,000 range.
Second best option is to start a small business of some kind that does not require substantial investment. Handyman comes to mind as an example or some sort of billing service maybe?
I would not recommend self directed investment in the stock market - most people lose money and since you don't have a lot of money to invest, commissions and fees will eat up a significant portion of it.
I would usually recommend a CD but interest rates it's not really worth it.
Fantastic question to be asking at the age of 22!
Saving and Budgeting
A very wise man suggested to me the following with regard to your net income
save 10% for retirement, which you don't touch until you retire, but read about options you have for investing which I have written earlier
save 10% for unplanned expenses (broken car, heath problem)
save 10% for planned expenses (holiday, car upgrade, etc.)
give 10% away to others more needy than yourself (what goes around comes around), or to causes in which you believe passionately
live off the remaining 60%, create a budget and live within your means
I've purposely not included saving a sum of money for a house deposit, as this is very much cultural and lots of EU countries have a low rate of home ownership.
Education / Entrepreneur
On the education versus entrepreneur question. I don't think these are mutually exclusive. I am a big advocate of education (I have a B.Eng) but have following working in the real world for a number of years have started an IT business in data analytics. My business partner and I saw a gap in the market and have exploited it. I continue to educate myself now in short courses on running business, data analytics and investment. My business partner did things the otherway around, starting the company first, then getting an M.Sc.
Investing
Other posters have suggested that investing your money personally is a bad idea. I think it is a very good idea to take control of your own destiny and choose how you will invest your money.
I would say similarly that giving your money to someone else who will sometimes lose you money and will charge you for the privilege is a bad idea. Also putting your money in a box under your bed or in the bank and receive interest that is less than inflation are bad ideas. You need to choose where to invest your money otherwise you will gain no advantage from the savings and inflation will erode your buying power.
I would suggest that you educate yourself in the investment options that are available to you and those that suit you personality and life circumstances. Here are some notes on learning about stock market trading/investing if you choose to take that direction along with some books for self learning.
Make sure you have a budget, there is a pretty cool budget tracker that you can download here (it works in excel and is easy to use). The important thing is to not only make a budget but also keep in touch and track your budget, some free ebooks and other investment ebooks too. Just start with the budget tracker: www.futureassist.com.au/young-to-mid-life Focus on paying off debt first
Next look at ETF's (Exchange Traded Funds) as a possible investment option - this is an Australian Government Website but ETF's all work in the same way: www.moneysmart.gov.au/investing/managed-funds/exchange-traded-funds-etfs
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