Case Study on John.
John is single and in his mid 20’s. Net Income $25,000 Debt Obligation = 0 Car payments = 0 Rent = 0 (John’s rent is included in his salary)
If you find yourself lucky enough to be in the same financial situation as John is in this case study, it is recommended that:
You start investing 50% of your pay check if possible. If your employer offers a 401k plan, you should definitely maximize your contributions to that plan. Since a 401k employer match is free money, by maximizing your contributions, you will maximize the amount of free money you receive.
You should set up a separate investment account to save for a home and a car. Someday you may want to own vs rent. Since you have no car payments, now is the perfect time to save for your next car.
If you are as lucky as John was, you are starting out in a great financial position. Keep up the good work. Also be sure to live within your means – remember, it is not what you make but what you keep that counts.