Being able to cover your expenses is crucial, but the jobs you take early in your career are likely to contribute more to your future than to your bank account. These opportunities build human capital, which can be far more advantageous in building work skills, forming important work relationships and building a professional portfolio. Picking a career path is impossible.
You never know what’s going to happen, how life is going to change, says Greg Rosston, MA ’86, PhD ’94, director of the public policy program at Stanford’s Institute for Economic Policy Research. To the extent possible, focus less on salary and more on finding opportunities that meet your career goals and allow you to improve your skills in the real world. Showing what you can do will help you get the jobs you really want down the road.
Financial stability is the ability to pay for the basics rent, groceries, paying down debt without stress. Don’t assume that a friend who makes more than you is more financially stable. And be careful when comparing your spending and saving goals.
Sethi says if you ask five people what a fulfilled life looks like, you’ll get five answers and five budgets. It can be easy to fall into the trap of thinking, “Once I make a certain amount, I’ll be happy.” (Or secure. Or able to save up.) Whatever your financial goals, you’ll need to prioritize your spending. And to do that, you have to figure out what’s important to you based on your circumstances.
Make it a habit to do a cost-benefit analysis
Rosston teaches students in his public policy and personal finance class to weigh the costs and benefits of their financial choices. Whether at the governmental and policy level or in consideration of your own savings account, we make subtle cost-benefit decisions every day. If you become more structured about asking the questions, you’ll get better at answering them.
How do you think about all the different implications of cost for any number of things in life” Rosston says. For instance, if you’re considering buying a car primarily to commute a short distance to work, add up the ancillary costs registration fees, fuel, maintenance and insurance. Then take any other personal priorities into consideration like the environmental costs of driving alone versus ride-sharing before making your decision. Whichever way you go, you’ll have thought through a fuller picture of the true costs of your choice.
Start planning for retirement
Retirement may seem far away, but how you prepare for your nonworking years at the beginning of your career can save you heartache down the line. In your early working years, you may not have money to save after you’ve accounted for monthly expenses. But once you can, Sethi recommends prioritizing with the “Ladder of Personal Finance,” working your way up as high as you can given the amount of money you’re able to set aside.
Your first priority should be to deposit up to the maximum annual amount in a 401(k) or similar tax-deferred retirement account, if your company provides one. Next on the ladder, establish a Roth IRA and contribute up to the maximum annual amount.