Creating your financial foundation while you are still young

By Lauren Elkins

For the Deseret News

Published: Wednesday, June 18 2014 12:00 a.m. MDT

Through scholarships, a year at community college, working through much of school, help from family (and a little on the credit card at the end), I was able to graduate with a bachelor's of arts from a university without a single student loan. When I went on to graduate school, I then paid for all of my tuition costs by working full time and receiving tuition reimbursement from my employer.


You may be paying off those student loans and your credit card debt, so what about your retirement? When you’re just starting your career, the thought of retiring — decades away — is the last thing on your mind on payday. But the difference starting now can make is astounding. An article on CNBC explains the numbers.

“A 25-year-old, for example, who makes $40,000 and contributes 10 percent of his salary to a 401(k) plan annually will amass $3.9 million by the time he retires at age 67. That figure assumes a 50 percent employer contribution match, a 5 percent estimated salary increase rate annually and an 8 percent investment rate of return.”

And with the same situation, but starting at the age of 30, that person would save $2.5 million. That’s a difference of $1.4 million. Take that to your grave.

I made my first contribution to my retirement account when I was 25. I feel pretty good about my future.

Emergency fund

Similar to saving for retirement, it’s hard to set aside money for savings when you’re paying off debts or staying on top of your bills. If you have unexpected expenses (car repairs, medical bills, unemployment), an emergency fund will help you get through the financial trauma without forcing yourself into more debt. Your goal should be to eventually save three to six months of expenses, but start with a reasonable goal of $1,000 or $2,000.

Pay yourself first, even if you’re just setting up an automatic deposit from your checking to a savings account of $20. If you don’t pay that first, you’ll spend the money without realizing it.

When I started earning a decent income, I was able to set up an automatic payment to my money market fund. Eventually, because of the habit, over years of continued deposits, the emergency fund expanded into a fund for a down payment on a condo. It was a nice bonus for sacrificing that extra spending money.


Making donations to charity a financial habit will also help set you up with a strong, economic foundation. Harvard Business School published an article about a study on charitable giving, “Feeling Good about Giving: The Benefits (and Costs) of Self-Interested Charitable Behavior." The study concluded the following information:

Happier people give more and giving makes people happier, such that happiness and giving may operate in a positive feedback loop (with happier people giving more, getting happier, and giving even more).

Other benefits of donating to charity include:

Charitable donations are tax deductible

When charitable given is driven by religious conviction, it will strengthen your spiritual life

Giving makes donors happier, improves their self-esteem and helps them feel more connected to the rest of the world

One of the jobs I had while I was in college was working for United Way of Salt Lake during its fundraising season. I saw first hand the good work it did and was constantly impressed by the number of charitable people I met. Sometimes, it was a blue-collar, hourly employee who contributed $1,000 in a year through payroll deductions. My faith in humanity that year was exceptionally high.


All of these financial goals may seem overwhelming so starting to invest may not be realistic while you’re still getting a career started, but now is a great time to learn. Start by learning some tips from a true expert, Warren Buffet:

Investing should be simple and steady. Begin with index funds that support your financial goals