Just Starting Out? Take These Seven Steps Toward Financial ...

Seven steps to financial independence · Spend less than you earn. · Have a saving mindset. · Create a rainy-day fund. · Control debt—don't let it control you. · Get ... Skiptomainnavigation Skiptocontent DownloadtheSchwabappfromiTunes®Close Skiptocontent FindaBranch ContactUs Call SchwabBrokerage 800-435-4000 SchwabPasswordReset 800-780-2755 SchwabBank 888-403-9000 SchwabIntelligentPortfolios® 855-694-5208 SchwabTradingServices 888-245-6864 WorkplaceRetirementPlans 800-724-7526 ...MorewaystocontactSchwab LogIn Schwab.com 中文登入 SchwabInternational SchwabAdvisorServices™ SchwabIntelligentPortfolios® SchwabAlliance SchwabCharitable™ RetirementPlanCenter EquityAwardsCenter® Schwab529 LearningQuest®529 Mortgage&HELOC CharlesSchwabInvestmentManagement(CSIM) PortfolioManagementServices OpenanAccount Accounts&Products Accounts Overview BrokerageandTrading BrokerageandTradingAccount TypesofBrokerageAccounts WhatisaBrokerageAccount RetirementandIRAs UnderstandingIRAs UnderstandingIRAs RothvsTraditional Withdrawals&Distributions Withdrawals&Distributions Age59&Under Age591/2&Above RequiredMinimumDistributions Calculators IRACalculators RothvsTraditional RothIRAConversion RMDs RetirementAccounts(IRAs) TraditionalIRA TraditionalIRAAccount WhatisaTraditionalIRA ContributionLimits WithdrawalRules RothIRA RothIRAAccount WhatisaRothIRA ContributionLimits RothIRAConversion WithdrawalRules IRARollover IRARolloverAccount WhatisaRolloverIRA RolloverIRA/401KRolloverOptions Combining401Ks HowtoRollovera401K InheritedIRA InheritedIRAAccount WithdrawalRules CustodialIRA EducationandCustodial Overview CollegeSavingsCalculator 529SavingsPlan Overview 529StateTaxCalculator LearningQuest529Plan EducationSavingsAccount CustodialAccount Overview CustodialTransfer PersonalChoiceRetirement SmallBusiness Overview SmallBusinessRetirement Overview Individual401(k) SEPIRA PersonalDefinedBenefitPlan Overview FAQs SIMPLEIRA Business401(k)Plan CompanyRetirementAccount MoreAccountTypes OpenanAccount Trading&Research Overview TraderOffering TradePricing PlatformsandTools Overview TradingSoftware WebTrading MobileTrading OrderExecution SchwabOrderExecutionAdvantage™ OrderRoutingProcess PriceImprovement RetailExecutionQualityStatistics Research InvestmentProducts Overview MutualFunds MutualFundsOverview FindMutualFunds FindMutualFunds InvestorInformation BuildaPortfolio InvestinaPortfolioSolution UnderstandingMutualFunds Overview BenefitsandConsiderationsofMutualFunds CostsandFeesofMutualFunds ETFsvs.MutualFunds TypesofMutualFunds TypesofMutualFunds EquityMutualFunds IndexMutualFunds AssetAllocationMutualFunds TargetDateMutualFunds CommodityMutualFunds Environmental,SocialandGovernance(ESG)MutualFunds ETFs Overview ETFsatSchwab Overview InvestorInformation SelectingETFs UnderstandingETFs Mutualfundsvs.ETFs BenefitsofETFs ETFCosts&Fees TypesofETFs Overview SectorETFs DividendETFs SmartBetaETFs Environmental,SocialandGovernance(ESG)ETFs BondETFs CommodityETFs CurrencyETFs IndexFunds Stocks Overview UnderstandingStocks Overview Over-the-counter(OTC)securities MasterLimitedPartnerships(MLPs) RealEstateInvestmentTrusts(REITs) BusinessDevelopmentCompanies(BDCs) InternationalStocks Overview ADRs,ForeignOrdinaries&CanadianStocks Options Overview HowtoTradeOptions UnderstandingOptions Bonds,CDs&FixedIncome Overview FixedIncomeProducts IndividualBonds CertificatesofDeposit BondFunds,BondETFs,andPreferredSecurities SelectingFixedIncome Pricing MoneyMarketFunds CashSolutions Cryptocurrency MoreInvestmentProducts Banking&Borrowing Overview BankOfferings Checking Overview SchwabBankDebitCard FAQs Savings HomeLoans&Rates StrategicBorrowing CreditCards FeaturedOfferings Overview ThematicInvesting SchwabStarterKit™ SchwabStockSlices™ SchwabPersonalizedIndexing™ RetirementIncomeSolutions Environmental,SocialandGovernance(ESG)Investing Advice AdviceSolutions Overview AutomatedInvesting AutomatedInvestingwithGuidance Overview CompareSolutions CompareOurSolutions CompareUsToOthers Resources AnIntroductiontoRobo-Advice RoboAdvisorMyths SchwabPrivateClient™ MoreAdviceSolutions FinancialPlanning overview FinancialPlanningOffering HowMuchYouNeedtoRetire PlanningCalculators ComplimentaryPlan Pricing Pricing Overview CommissionsandFees UnderstandingInvestmentFees TransferringAccounts Overview CostsandConsiderations OTHERDETAILS Overview ClientRelationshipSummaries Seehowwestackuptothecompetition. 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Explorewaystoinvest> Learn InvestingInsights Overview Overview Stocks Bonds ETFs MutualFunds Trading Options Futures Perspectives Overview MarketCommentary GovernmentPolicy Sectors International Retirement Overview SavingforRetirement InRetirement TheBasics Overview HowtoInvest Overview InvestingBasics InvestingGuide InvestingPrinciples Media Overview Podcasts Magazine SchwabLiveDaily OpenanAccount LogIn FindaBranch ContactUs LogIn FinancialPlanning JustStartingOut?TakeTheseSevenStepsTowardFinancialIndependence August10,2021 CarrieSchwab-Pomerantz Thepathtofinancialindependencecanstartrightnowwithsevenimportantsteps. DearReaders, I’dliketoextendaheartycongratulationstothelatestgraduates.There’snodoubtwe’veallweatheredatoughyearandahalf.Butnow,asanewgrad,youcanpreparetostrikeoutonyourown.Maybeyou’vegotyourfirst“real”job,oryourfirstapartment—orarestilldecidingwhatyournextchapterwillbe.Inanycase,thisistheperfecttimetotakesometried-and-truestepstowardfinancialindependence. Youmayhaveheardmuchofthefollowingadvicebefore,butitbearsrepeating—bothasacalltoactiontoyoungpeopleandasaremindertoanyoneatanyagewhoaspirestofinancialfreedom. Sevenstepstofinancialindependence Spendlessthanyouearn.Overspendingissupereasytodo,especiallywiththeeaseofonlinepurchases,creditcardsand“buynow,paylater”offersasaconstanttemptation.Therefore,youhavetodrawalinebetweenwhatyouabsolutelyneedandthenice-to-haves.Thebestwaytodothisistocreateabudgetlistingessentialexpenseslikehousing,utilities,food,transportation,insuranceanddebtpaymentsinonecolumnandextrassuchasentertainment,diningoutandvacationsinanother.Ashortcutforbudgetingistousethe50/30/20rule:Thismeanstargeting50percentofyourincometowardneeds;30percenttowardwants;and20percenttowardsavings. Haveasavingmindset.Forsomepeople,savingcomesnaturally.Othersalmosthavetotrickthemselvesintodoingit.Onegreattacticistopayyourselffirstbysettingupanautomaticmonthlytransferfromyourcheckingtoyoursavingsaccount.Butwhateverittakes,makeitahabit.Tokeepyoumotivated,spelloutyourgoals, periodicallycheckyourprogressandmakeadjustmentsasneeded. Createarainy-dayfund.Continuingthethemefrompointtwo,carveoutaportionofyoursavingsbudgettobuildaseparateemergencyfund,aimingtohaveenoughcashtocoverthree-to-sixmonths’essentialexpenses.Ifyou’rejuststartingout,aimfor$1,000-$2,000andbuildfromthere.Why?LooknofurtherthanthepandemicwhenmillionsofAmericanswerecaughtwithadropinincomeandunexpectedexpenses.Whatwouldhappenifyoulostyourjoborwereinjuredinanaccident?Howwouldyoupayyourbills?That’swhyarainy-dayfundisessential,regardlessofyourage. Controldebt—don’tletitcontrolyou.Creditcardscanfeelsofreeing—buttheycanalsolockyouintospiralingandexpensivedebt.It’sfinetousecreditcardsforconvenience,butonlyifyoudon’tchargemorethanyoucanreallyaffordandcanpayoffinfulleverymonth.Inaddition,ifyouhavestudentdebt,stayontopofyourloans.Consolidate ifitmakessense,reviewyourrepaymentoptions,andreachouttoserviceprovidersifyou’restrugglingandareatriskformissingapayment. Getinsured.You’vehearditbefore,andyoumighthaveresistedit,butmakesureyouhavehealthinsurance.Whetherthroughworkoranindividualpolicythroughhealthcare.gov,don’ttaketheriskofbeinguninsured.Ifyou’re26oryounger,you’restillablebeincludedonaparent’spolicy.Ofcourse,ifyouhaveacar,youneedautomobileinsurance.Renting?Lookintoalow-costrenters’policy.Abigpartofbeingindependentisbeingprepared.  Thinkretirementstartingnow.It’ssupereasytopostpone savingforretirementwhenyou’reyoung,butthesooneryougetstarted,thelessyou’llneedtosave.Inyour20s,aimtosavebetween10-15percentofyourgrosssalarybetweenwhatyouandyouremployerarecontributing.Waituntilyou’reinyour30s,andyou’llneedtorampthatupto15-20percent.Ifyouremployeroffersa401(k)match,youshouldattheveryleastcontributeenoughtogetthefullamount.Ifyou’reonyourown,consideropening atraditionalorRothIRA.Theyeachhavedifferenttaxadvantagesthatmaymakeoneabetterchoicedependingonyoursituation.Rothaccountsmaybeagoodchoiceforayoungpersonbecause,whileyoudon’tgetthetaxadvantageupfront,withdrawalsaretax-freeafterage59½whenyou’llpotentiallybeinahighertaxbracket. Invest.Savingisonething,butinvestingisanother—andIencourageyoutostartinvestingassoonasyou’vebuiltupyourrainy-dayfund.Beforeyougetstarted,thinkaboutyourgoals,timehorizonandrisktolerance.Thiswillhelpyoudevelopaninvestmentstrategyandchooseappropriateinvestments.Thankfully,itdoesn’ttakealotofmoneythesedaystogetstarted,especiallyifyouusemutualfunds,exchangetradedfunds,orfractionalshares.Dependingonhowinvolvedyouwanttobe,youalsomightconsideraroboadviceservice.Ifyou’restillunsure,considerworkingwithafinancialadvisorwhocanhelpyougetstarted,diversify,andmakeadjustmentstoyourfinancialplanasyourgoalsandmarketconditionschange.Youdon’tneedalotofmoneytogethelp.  There’smoreofcourse.However,ifyoutakethesesevenstepsnow—andremainmindfulaboutthewayyouspendandsave—you’llnotonlygiveyourselfagoodstart,you’llbeonyourwaytolastingfinancialindependence. Haveapersonalfinancequestion?Emailusataskcarrie@schwab.com.Carriecannotrespondtoquestionsdirectly,butyourtopicmaybeconsideredforafuturearticle.ForSchwabaccountquestionsandgeneralinquiries,contactSchwab. Areyouontracktoreachyourgoals? Seehowwecanhelp MorefromCharlesSchwab Retirement ShouldIFileforSocialSecurityNoworLater? Youdon’thavetofileforSocialSecuritythemomentyouretire.Infact,mostpeoplewillbenefitbywaiting. Investments ShouldYouCareAboutRisingInterestRates? Willrisinginterestratesaffectyoupersonally?Mostlikely.Noneedtopanic,butbesttobeaware. Investments HelpYourCollegeGradBecomeanInvestor Lookingforameaningfulcollegegraduationpresent?Consideropeninguptheworldofinvesting. Relatedtopics Retirement Investments FinancialPlanning Budgeting Saving