never had a credit card, don’t have a Roth IRA, no debt and my car is paid off. I never went to college and grew up with lower middle class parents who never really taught me how to be financially literate. And for context I live in the DFW metroplex. I got lucky and became a house assistant for a wealthy family. They compensate me for all of my gas, even to and from work and for work errands. My salary is $60000 a year. I also get a health insurance stipend of $800 a month. I think the extra $800 is not taxed? But I get paid twice a month and my bi-weekly take home pay is $2399. I’m also a virtual Assisant for someone I’ve been working for about 2 years. I get paid $250 weekly through Zelle so that’s also not taxed. This is the first time in my life I’ve ever made decent money. I’d say with my base pay, gas compensation, health insurance stipend and virtual assistant work I make about $6000 a month. I also do overnight baby sitting for other families sometimes so that will bring in extra income every now and again. I have 14k in total, $2000 of that is cash from bonuses my house Assisant job has given me and the rest is just sitting in my checking account.
My bills –
$1550 rent
$40 internet
$75 phone bill
$305 health insurance
$300 utilities
$150 car insurance
I should also mention I’ve been getting dental work done to fix some teeth problems I have over the last year so that’s cost me a couple thousand and usually a couple hundred every month.
I’ve debated moving in with my parents to save money to buy a house but even then I’m clueless about that process.
I guess I don’t have any particular questions, I’m just wondering how I can be more financially literate moving forward? Please be nice 🙏
27 y/o and financially illiterate
byu/oatmilkhunny inpersonalfinance
Posted by oatmilkhunny
13 Comments
If you don’t have any questions then the [prime directive](https://www.reddit.com/r/personalfinance/wiki/commontopics/) is your friend right now.
Just know that even with your “financial illiteracy” you’re at a decent spot so keep it up! Don’t gloss over taxes, definitely figure that out and start paying them. A surprise tax bill is never fun.
The fact that you have no debt is already way ahead of the average person. Don’t discount yourself.
You’re doing pretty well. You don’t have to know everything about finances, just the bare minimum to succeed. You could ask chatgpt to make a personal finance course for you and teach you from it. You can also buy a book, maybe “Personal finances for dummies”.
Of course, read the Prime Directive in this sub. You need to be saving something for retirement (Roth IRA is probably your best bet right now). And, you need to build a budget so you know what your expected cash available to save is, and then see if that aligns with your goals. It honestly sounds like you don’t have goals yet (which is ok), so you should take some time to figure out what you want to be doing in the next 1, 5, 10, 20+ years and then build a plan that works towards that.
Starting to think about this stuff is great. There’s a lot to get into, though, but most of it comes down to making smart spending decisions, and to maximizing your dollars.
For maximizing your dollars, you mentioned having 12k in your checking account. That is great. However, it’s not doing anything for you there. You should think about opening a HYSA (high-yield savings account) and moving most of that money there, where it can earn 3-4% interest, rather than the 0.1% or whatever miniscule amount your checking account earns haha. That money will be your emergency fund, and should only be accessed, obviously, in case of emergency. General rule of thumb is to try and have 6 months worth of expenses in that account, so start working towards that. Leave some amount in your checking account though, just to pay rent and other expenses and not risk accidentally overdrafting. This may be 3k, 5k, or whatever you are comfortable with.
Next, credit cards. There are a lot of free credit cards out there that will earn cashback rewards on purchases. They also are safer to use than debit cards. However, for people lacking financial self control, they can obviously lead to trouble. The key is NOT getting in the mindset of thinking your credit card limit is cash, and “your money” to spend. But since you’ve been saving money pretty well, it doesn’t seem like you would have this problem. My approach with credit cards is treat them like debit cards, only spend what I actually have, and pay them off completely every time I get paid.
And speaking of which, my payday routine:
1) receive paycheck
2) pay off all credit cards and bills to a balance of $0
3) calculate how much my checking account has left above that 3k/5k/whatever amount I talked about earlier
4) move that extra amount to my HYSA if I need to beef up my emergency fund, or to a retirement account
Which brings us to retirement savings. I’m guessing your employer doesn’t provide a 401k or other retirement account. It would be great to open an IRA (most likely a Roth IRA) and start contributing to that. Compound interest is incredibly powerful, and so the earlier in life that you can contribute to retirement, the better.
An HSA (health savings account) is another thing to look into if you have an eligible (high deductible) health insurance plan. It allows you to contribute money tax-free, and never pay taxes on it as long as you end up using those funds for medical expenses.
I’m happy to clarify anything, or answer any additional questions. Hopefully this doesn’t feel too overwhelming!
The IRS will not agree that $13,000 of income is not taxable. ($250 per week x 52 weeks per year)
If you receive money for work, it is taxable income regardless of method of payment. Heck if you got paid in eggs, there would still be some worksheet for you to fill out to impute your income so that you could pay your taxes.
Just because your client doesn’t do their part to issue you a 1099 doesn’t mean you don’t have to do your part to declare the self-employed income and pay federal, state, local, and FICA taxes on it.
I am in the same boat, but I found a first time home buyers education class, and a financial literacy class both 1 day, 8 hours. Both on Saturday. I just googled for local classes. Both were extremely helpful.
Stick to basics of saving and investing. Keep at least 6 months of living expenses in high yield savings acct. Contribute to 401k, if available, to get full employer match. Then max out Roth IRA. If you have $ left over contribute more to 401k. Choose low cost stock index funds for instant diversification. Stay the course no matter what market news you hear.
You might be investment illiterate, if such a concept is even legitimate (I contend it’s not) but that’s because it takes lots of money to make lots of money.
Culturally we gatekeep wealth so you can only do the best you can with what you are given. Clearly you are doing just that.
As for your remote assistance work, why do you say that’s not taxable?
* never had a credit car,
* no debt and
* my car is paid off
dude, you are doing far better than a lot of us at that age
I also live in texas but recently moved from dfw and currently in West TX. Im 32F and offer financial services for people in your exact situation. I charge $150 which is includes an indepth look at your financials. A 2-3 page report with tips, tricks, and recommendations tailored specifically to you. I hold a bachelors degree in corporate finance and currently have 6 clients i do this for. Every meeting you’d like to have after the first ranges from $50-$125 depending on what is needed. I guarantee my clients will save a minimum of $300/month by following my recommendations. The best part? It includes modern solutions for modern problems. No Dave Ramsey, financial guru bs. Just straight up, bold-faced facts. If you or anyone in the thread is interested, feel free to reach out!
Besides the internet, your credit union can also connect you to credible resources to help with an investment account for your own retirement. I would also open up an investment account you could use in the event you have an accident and cannot work. You can all get accident insurance and life insurance, but it would be good to have a separated savings just for that.
I would also suggest buy a an assets that is getting appreciation, even if it’s just two acres, you can do nothing in it, can sell that again in a few years and get some gain to it, I would just suggest looking into any maintenance laws like clearing dead trees from wild land property etc. this works as a safety net and it’s common for larger corporations to do this and sell their assets if they need to put themselves above water.