This financial life episodes give us a chance to delve into a listener’s personal finance life and to give them some advice to improve it. Today we have This Financial Life with Connor.
Connor is 23, lives in Manhattan, has been working in finance as a commercial underwriter for about a year and is making $70,000 annually before bonus. He has no debt, credit card debt or student loan.
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Connor has some money invested in individual stocks. He bought GM after the recall fiasco because the price was low. A smart move as GM might have dipped, but it’s “too big to fail” so not going anywhere anytime soon. At least until Elon Musk decides otherwise. He also bought stock in an e-cigarette company because it’s a fast-growing trend. And WWE (disclaimer: Connor is not a pro-wrestling fan) after it dropped 43% on news that it did not get enough monthly subscribers to offset lost pay-per-view orders. So Connor does his research and makes a move when other’s fear to tread. A favorite LMM trait.
Once again proving he is an attentive LMM’s fan, Connor has maxed out his 401K and Roth IRA accounts. At present, Connor has about $54,000 invested, and the majority of that money is saved from part-time jobs he held while in high school and college. If only us older folks had been as savvy as Connor.
So what is there to improve upon? Well, Connor might be living a little too baller. Not because of his salary but because of where he lives. Manhattan is expensive people. Even though Connor has roommates, he’s spending 43% of his income on rent. A good rule of thumb for rent expense is about 30%.
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Connor also makes the mistake that a lot of us make by keeping too much in a savings account. That money is better utilized for something like Betterment. A Betterment account can be liquidated in two days. Unless you need bail money or something, there aren’t too many emergencies that will require faster access.
We all wish we could be as smart as Connor was with his money so early on. He has some room for improvement, but he is nearly a textbook case of smart money management. As long as Connor continues to listen to our podcast, he’ll do well.
Mint: LMM’s budgeting weapon of choice.
Betterment: The source of your emergency fund for everything other than bail money.