One thing that I am sure many younger people are struggling with is seeing how they can go from graduating college with student loan debt (typically) to having a stable financial future. This was certainly the case for me when I graduated college and struggled with the realization that I couldn’t pursue the career path I had planned. Now that I have managed to get myself into a job that I love, built my net worth and enjoy multiple streams of income from side businesses I have built, I want to reflect on my journey. I hope this will be helpful to you as you work toward your own financial goals.
Getting started by saving like crazy
I graduated pre-med from Cornell. But after an unsuccessful round of medical school applications, I decided to take my career in another direction.
Looking back, not getting into med school was probably a good thing. Without the need to get into more debt, I quickly turned toward things that I was passionate about. I found a job where I was able to work with computers and programming. I asked my parents to let me move back in, and I used every dollar I earned to pay down my student loan and credit card debt. I paid off about $30,000 in debt in just over a year — pretty amazing.
Another thing that I did right in those early years was to open an IRA account and start investing. As luck would have it, I got a chance to get up close and personal with a few bear markets and crashes early in my investing career. But I was determined to succeed. I kept on maxing out my IRA each year and kept on investing.
Today, it’s even easier to make smarter investing decisions with tools like Personal Capital and ETFs, low-cost index funds and target retirement funds as investment choices. I think I would have done even better if I had access to these tools (for example, when I started, Roth IRAs didn’t even exist!).
Basically, I was a voracious saver. I was stingy. I lived with my parents. I refused to get into debt. And I saved every penny I could muster. Early on, I don’t know if I had yet realized the value of creating multiple streams of income, but I knew I wanted to save, invest and avoid debt to build my financial independence.
Becoming a homeowner
One of the first pivotal points for my finances was convincing my parents that they (we) should stop renting and buy a house. It turned out to be one of my best investments ever. I bought a house together with my parents in 1998 for $185,000. The home price peaked at about $650,000 before the 2008 crash. Even at its current valuation of $550,000, that’s a handsome profit.
Although we might not see that kind of appreciation for a long while, this is a decent time to buy a house. The housing market is still depressed in many areas, and mortgage rates are at historic lows.
If you’re planning to stay in the house for a while, owning a home has many benefits. To get started, read as much as you can about being a home owner, start saving now for your down payment and make a plan to buy a house that you can afford. A house isn’t a stream of income and, arguably, you may not see the kind of appreciation I got. But if you buy wisely, your home can add to your long-term net worth.
Multiple streams of income and the never-ending hustle
I’ve never been good at settling. Specifically, I never felt earning money from my full-time job was good enough … I wanted more.
I was fascinated the first time my friend showed me a BBS (a percursor to the Web we know today). I tinkered with running one until the Internet as we know it killed it off.
But my passion for tinkering with the Web never died, and it evolved into my first website in 2005. I kept pursuing it and eventually it turned into my first additional source of side income. Today, that side income is a full-blown business and opened the door to a great career opportunity.
Although I have already accomplished more than what my younger self could’ve imagined 20 years ago, I am still hustling. For example, I recently got into real estate investing. My wife and I started buying houses to rent out. So far that effort is turning into a new source of “passive” income and I think there is a real possibility that it will turn into yet another full-blown business one day.
If I had to sum it all up, my advice is:
- Pay off debt as soon as you can (when you start off, it’s usually student loans and credit card debt) … get rid of them!
- Start investing as soon as you can. Learn about IRAs and your 401(k) if you have one. Don’t make excuses; just start investing.
- Save money. Whether it’s for an emergency fund or for a down payment on your first home, just start saving.
- Pursue your passion outside of your day-job. You never know when it could lead to multiple streams of income.
- Experiment … especially with business ideas.
- Don’t settle.
If you can’t relate to my story, but still want to improve your finances, may I suggest a different approach and start with this post I wrote: 50+ Mini-Tasks to Improve Your Finances One Step at a Time.
What were the best financial decisions you made after college?