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I am currently 22 years old, I work as an insurance biller and make about 800-900 dollars every two weeks cash. I have no expenses because I still live with my parents but I'm trying to branch out on my own in the next year or so.

I was wondering at this stage of my life what would be the smartest thing to do for me, I know saving is a must I don't really have much saved as of right now but will defiantly start saving now.

What are some smart investments and things I can get into to make some money even if its a little bit?

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    Read Rich Dad, Poor Dad and Start Late, Finish Rich to start ;)
    – Ross
    Commented Jun 15, 2016 at 20:38
  • Smartest thing will be first not to branch out and take care of your parents . :)
    – Amar Singh
    Commented Mar 3, 2017 at 6:12
  • @YoYo, That is horrible advice unless his parents are in need of the care or in poor health of course. Since OP is only 22, he can afford to branch out and become independent, which will allow him to take much better care of his parents when they do become of age.
    – Prodnegel
    Commented Mar 17, 2017 at 15:28
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    @Prodnegel .. Nowadays children does not come back to parents after branching out , So in that way I had said.. what you said I totally agree, be successful and return to parents ON TIME .. if this is possible with OP than I totally with you what you said
    – Amar Singh
    Commented Mar 17, 2017 at 15:35
  • @YoYo, I agree as well.
    – Prodnegel
    Commented Mar 17, 2017 at 15:36

4 Answers 4

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Fantastic question to be asking at the age of 22!

Saving and Budgeting

A very wise man suggested to me the following with regard to your net income

  • save 10% for retirement, which you don't touch until you retire, but read about options you have for investing which I have written earlier
  • save 10% for unplanned expenses (broken car, heath problem)
  • save 10% for planned expenses (holiday, car upgrade, etc.)
  • give 10% away to others more needy than yourself (what goes around comes around), or to causes in which you believe passionately
  • live off the remaining 60%, create a budget and live within your means

I've purposely not included saving a sum of money for a house deposit, as this is very much cultural and lots of EU countries have a low rate of home ownership.

Education / Entrepreneur

On the education versus entrepreneur question. I don't think these are mutually exclusive. I am a big advocate of education (I have a B.Eng) but have following working in the real world for a number of years have started an IT business in data analytics. My business partner and I saw a gap in the market and have exploited it. I continue to educate myself now in short courses on running business, data analytics and investment. My business partner did things the otherway around, starting the company first, then getting an M.Sc.

Investing

Other posters have suggested that investing your money personally is a bad idea. I think it is a very good idea to take control of your own destiny and choose how you will invest your money.

I would say similarly that giving your money to someone else who will sometimes lose you money and will charge you for the privilege is a bad idea. Also putting your money in a box under your bed or in the bank and receive interest that is less than inflation are bad ideas. You need to choose where to invest your money otherwise you will gain no advantage from the savings and inflation will erode your buying power.

I would suggest that you educate yourself in the investment options that are available to you and those that suit you personality and life circumstances. Here are some notes on learning about stock market trading/investing if you choose to take that direction along with some books for self learning.

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    I'm all for saving in a 401(k) up to the match. But, I'm trying to imagine the budget of a person who earns $23,400/yr (cash, so gross up a bit for tax) yet can take 40% off the top.
    – JTP - Apologise to Monica ♦
    Commented Jun 17, 2016 at 21:10
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    @JoeTaxpayer, the OP says he lives at home and has low expenses, so in his case, this is plausible. But yes I agree, the 40% is a challenge, but maybe that's much of the western world is in debt, because we choose to live beyond our means - purchasing cable TV, having the best car and choosing lifestyle over good financial planning!!
    – Marcus D
    Commented Jun 18, 2016 at 6:40
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    I appreciate the update, +1.
    – JTP - Apologise to Monica ♦
    Commented Jun 18, 2016 at 10:38
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Get an education. A bachelor's degree preferably, but AA or even a certificate are fine too. It will increase your earning potential significantly and over your lifetime it will earn you a lot of money. You make around $30,000 a year now, median salary for someone with a bachelors in the humanities is around $45,000. If you degree is in the STEM field, that goes up to $55,000 - $65,000 range.

Second best option is to start a small business of some kind that does not require substantial investment. Handyman comes to mind as an example or some sort of billing service maybe?

I would not recommend self directed investment in the stock market - most people lose money and since you don't have a lot of money to invest, commissions and fees will eat up a significant portion of it.

I would usually recommend a CD but interest rates it's not really worth it.

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  • I have an AA and I currently work in insurance billing I can see myself getting into this same field just doctors never pay on time lol.
    – Arthur Zusman
    Commented Jun 15, 2016 at 17:15
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    Good for you. Getting more education is still worth it though: pewsocialtrends.org/2014/02/11/…
    – ventsyv
    Commented Jun 15, 2016 at 20:19
  • I think CDs are good for an emergency fund though - provides a cushion for safe investing. See my answer to a similar question - money.stackexchange.com/a/67210/14946
    – brichins
    Commented Jul 11, 2016 at 18:29
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Determine how much you are going to save first. Then determine where you can spend your money. If you're living with your parents, try to build an emergency fund of six months income. The simplest way is to put half of your income in the emergency fund for a year.

Try to save at least 10% of your income for retirement. The earlier you start this, the longer you'll have to let the magic of compounding work on it. If your employer offers a 401k with a match, do that first. If not, consider an IRA. You probably want to do a Roth now (because you probably pay little in taxes so the deduction from a standard IRA won't help you).

After the year, you'll have an emergency fund. Work out how much money you'll need for rent, utilities, and groceries when you're on your own. Invest that in some way. Pay off student loans if you have any. Buy a car that you can keep a long time if you need one. Go to night school. Put any excess money in a savings account or mutual fund. This is money for doing things related to housing. Perhaps you'll need to buy a washer/dryer. Or pay a down payment on a mortgage eventually.

Saving this money now does two things: first, it gives you savings for when you need it; second, it keeps you from getting used to spending your entire paycheck. If you are used to only having $200 of spending cash out of each check, you will fit your spending into that. If you are used to spending $800 every two weeks, it will be hard to cut your spending to make room for rent, etc.

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  • +1 for spending habits. For the first few months I worked as a teenager, I blew it all on junk food and entertainment. Realized pretty fast that I needed to deposit my check instead of cashing it. In fact, I stopped carrying cash entirely and got a debit card, which forced me to think about whether I actually had funds to spend and evaluate purchases, instead of just pulling bills out of my pocket.
    – brichins
    Commented Jul 11, 2016 at 18:32
  • magic of compounding - yes. Saving 200 a month now is better than saving 300 a month ten years later.
    – Xalorous
    Commented Oct 5, 2016 at 13:38
  • I realise this is a late comment to this reply, but just on the point of repaying student loans ... only repay loans that are of high interest rate. My wife's student loan is about 0.25%, and making more than that (above inflation) is generally straightforward.
    – Marcus D
    Commented Jan 11, 2021 at 14:21
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  1. Make sure you have a budget, there is a pretty cool budget tracker that you can download here (it works in excel and is easy to use). The important thing is to not only make a budget but also keep in touch and track your budget, some free ebooks and other investment ebooks too. Just start with the budget tracker: http://www.futureassist.com.au/young-to-mid-life

  2. Focus on paying off debt first

  3. Next look at ETF's (Exchange Traded Funds) as a possible investment option - this is an Australian Government Website but ETF's all work in the same way: https://www.moneysmart.gov.au/investing/managed-funds/exchange-traded-funds-etfs

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    Traditional mutual funds are a perfectly reasonable alternative to ETFs.
    – keshlam
    Commented Jun 16, 2016 at 14:24

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