Help starting saving

[BuckyBadger]

I am an independent contractor so my company doesn’t provide any benefits not even 401K. (I think 401K counts as benefit)

Then you need to get yourself started on a Roth IRA. It's a retirement account funded with your after-tax dollars. You can contribute up to $5000 a year. The money grows tax-free until retirement age and when you withdraw it you don't have to pay taxes on it because it was already taxed when you earned it.

What are you doing for health insurance as an independent contractor?

[Sir Casm]

Then you need to get yourself started on a Roth IRA. It's a retirement account funded with your after-tax dollars. You can contribute up to $5000 a year. The money grows tax-free until retirement age and when you withdraw it you don't have to pay taxes on it because it was already taxed when you earned it.

What are you doing for health insurance as an independent contractor?

I am still covered under my student insurance till January end right now i am browsing the market for some good plan.

[Sir Casm]

Where can I find more info on Roth IRA?

[jteezie]

Welcome to the community.

You're in a good situation, congrats. I concur with everyone else about holding off on the car. In your situation I likely wouldn't own one either. The cost savings are fantastic. Hypocritically, I actually live rather close to work too, and I don't drive to work (savings on parking, gas, etc), but I own a cheap car because I drive long distances every so often.

Here's the bigger picture:

I recommend that you take advantage of your new situation by maintaining your college spending levels for a little while. There's too much of an urge to immediately spend money especially if a $900/wk is the biggest paycheck you've ever received. However, if you immediately get into the habit of spending money, it starts a vicious cycle. Investing the excess money when you're young and don't have needs that absorb your paycheck (i.e. car payments), will benefit you so incredibly much that you will thank all of us for suggesting that you look immediately into your 401k and Roth IRA options.

When I got my first job, I immediately put 50% of my income into my Roth 401K (you should see if you company offers a Roth 401k and pick that over a traditional 401k. The difference is with their tax treatment. Roth is much better for young people). I'm 27 now an don't worry about my retirement anymore. In contrast, the average person enters their mid 30's and starts panicking about retirement savings. At this point they are behind because there is this magical investment concept called "compound interest." The general rule is roughly that every 7-10yr head start you get on investing, you double the money you have at retirement. Also, they now have families and house payments to support, among other things. So, by starting 10 years earlier, you save yourself up to 40 years of hard work.

Good luck

[Joan.of.the.Arch]

I'd just like to mention that as an independent contractor, no taxes will be taken out of your check. It will be your responsibility to save up what you will owe in income tax, social security tax, Medicare contributions, and any state and local taxes that are normally collected from a payroll check.

There are instructions for how to do this on the IRS website and they aren't too hard to understand. The federal government will expect you to send in payments 4 times per year.

[snshijuptr]

Congrats on the job and on not planning to blow your first paycheck.

A Roth IRA is a nifty retirement account perfect for young adults. You can contribute up to $5000 a year to the account. You set one up at a brokerage firm like Fidelity, Vanguard, ING's ShareBuilder, etc. The money goes in after you pay taxes on it (so from your take home pay) but after it grows for 30+ years, you can take out any growth tax free (major savings). As someone who recently opened a Roth IRA and is looking to open another (for my husband), here is my advice:

1) Put away $3000 in a regular old savings account
2) Go to Vanguard to open a Roth IRA (I use Fidelity, but I will open my next Roth with Vanguard. They have much lower fees on their mutual funds).
3) Put your money in an Index Mutual Fund or a Target Retirement/Age Based Fund.
4) Setup automatic contributions. Since $5000 is not evenly divisible by 12, I do $417 for 2 months and then $416 for the third month. You could also do an even amount for all months but one, or whatever.

This should all happen though AFTER you setup a basic emergency fund. The e-fund should cover 3 months of expenses (rent, bills, food, a little flexible money) in case something comes up (emergency flight, laid off, emergency move, etc). The easiest thing to do is to decide how much of your paycheck you DON'T need and have that transferred to savings after every pay period.

If you work hard and keep seeking career advancement without inflating your standard of living, saving will get easier and easier.

[Sir Casm]

Thanks every one for your advice I have got a good idea now on how to go ahead from here. But i will keep posting my questions on this forum as i find it very helpful.

Everyone keeps telling me to save for my retirement; shouldn’t I save for my wedding first?

[disneysteve]

Everyone keeps telling me to save for my retirement; shouldn’t I save for my wedding first?

Nope. Saving for retirement is a NEED. Saving for a wedding is a WANT. Needs always come first.

[Sir Casm]

I have few questions about saving for retirement but this is not the right thread to discuses that so i have started a new thread for it.

To saveor not to save (for retirement)

Again thanks all for ur suggestions and advice.