How do you recommend I start saving at 24 years old?
I am a 24-year-old female with a full-time internship and earning $23/ hour. Going forward, I hope to make $70,000 a year. How should I start saving and investing my money to consolidate my position financially?
I applaud your decision to start investing early. Since you are currently working in an internship, you may want to consider opening a Traditional IRA or Roth IRA account. The Traditional IRA is funded with pretax money. Contributions are deductible from your gross income and it grows tax-free until funds are withdrawn. Upon withdrawal, taxes are payable.
A Roth IRA is funded with aftertax money. Contributions are not tax-deductible, but the funds contributed grow tax-free and no further taxes are payable upon withdrawal. Either type of IRA would be appropriate for you.
If you are investing on a regular basis, you might begin with approximately equal contributions to VTI (Vanguard Total U.S. Market exchange-traded fund) and VXUS (Vanguard Total International Market exchange-traded fund). These would give you exceptionally broad diversification as well as the opportunity to participate in the investment benefits of worldwide economic expansion.
Vanguard's telephone number is 877-662-7447.
Good for you to take action on investing in your legacy! Based on the information you provided, I recommend that you save and invest in two ways (one short-term and one long-term). You can open an individual taxable account for short-term (savings, future purchases, etc.) and a Roth IRA for long-term (tax-free growth and qualified withdrawals). A low-cost ETF portfolio is a great way to diversify risk as you invest. Many firms have a high initial minimum, but you can open both account types with no minimums at Betterment.
You should immediately start contributing the 5500 annual maximum to a Roth IRA so you can grow your money tax-free. You should contribute the 3450 annual maximum to an HSA which can be deducted from your income and which you can withdraw tax-free when you reach 65 years of age. If your company offers a 401(k), 403(b), or 457 plan with a matching employer's contribution, be sure to put at least the minimum amount required to get a full match.
If you learn the discipline of having money which will grow tax-free for decades then you will be way ahead of almost everyone else--even those with much higher incomes.
I remember before I started my own company that I had a higher net worth than my boss' boss' boss, because he had zero discipline and zero planning with his financial life even though his income was about twice as high as mine.
THe first thing you need to do is determine what some of your financial goals are. Some are long term, some shorter. I would think some needs to go toward retirement, and some may need to go toward things like a first home, getting married, etc. Once you figure out what is important, you can begin to figure out what vehicles to use to best get you there.
You are thinking well to start saving/investing early. Firstly, create your safety net of around 6 months income in a bank account. That way you have access to money without tax conseqences. Next, invest in pre-tax investment accounts like an IRA, 401k etc. Lastly, once you have satisfied the first 2, invest your after tax dollars. Given your age you can afford to be a little more aggressive in your investment style.
Covering all three areas will stand you in good stead for the future. Find an advisor you feel you can trust and grow with them.