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Financial Checklist For Your 20's

Yesterday I learned that one of my nephews and his new wife (they're in their 20's) are making a lot of money and trying to figure some things out. I'm thrilled for them but they haven't asked my opinion on anything so I will keep my thoughts more generic and share them here. If they ever ask, cool I will give my thoughts. It can be tough to wait to give advice until you're asked realizing you may never be asked.

    1. Buying a house

    They are not comfortable with the current environment where prices are up kind of lot and interest rates are way up. They think a mortgage would run them about $4500/mo. They make enough to cover that but I can see where that would be uncomfortable. It is quite possible that waiting could result in chasing the market higher for years. To the extent they want to buy a house (they do) and are going to stay there for a long time, biting the bullet with a 15 year mortgage, not 30 year, would likely turn out to be a very good decision.

    Buying a house with the intention of trading up soon is very speculative and not something I would want to do.

    2. Don't buy that house thinking you're going to trade up in 5 years

    3. Build a robust emergency fund

    4. Retirement savings

    They make enough that saving money on taxes by contributing to a traditional 401k (or whatever they have access to) is smart. I would however split my contributions to include a Roth 401k (or IRA, whatever they have access to).

    5. Be open to the possibility they are just lucky

    I don't really understand what they do for work. From the standpoint of you never know, it is possible that these will turn out to be their peak earnings years. How many jobs will be displaced by AI? A lot? A little? Their jobs? Your job? My job is definitely one that could so displaced.

    6. Just because you can, doesn't mean you should

    The simplest example might be not upgrading cars every few years. Cars now can last for a very long time. Sure, buy a nice, new car if you want, I'm just saying drive it for a while, they last a long time.

    7. Find the right balance in priorities

    There's a balance to be struck between saving money for the future and doing interesting things along the way.

    8. Do financial favors for your future self

    Building up an emergency fund will give them optionality in the future. If these are their peak earnings years then aggressively saving for retirement will allow them to not have to save so much later if they can't. Saving aggressively now would also potentially allow them to spend more on fun later.

    9. You never know what the future you will want to do

    Everything you think you're interested in could change.

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