This is the second year I've sat down to do taxes. It's also the first year I've had a 401(k) and the first year I've actually had visibility into and control of all my finances. I've been able to stand on my own for a while (this was one of my big goals throughout my 4 years at college), but last year around this time was when I went home armed with a sheaf of numbers and Had A Talk About Responsibility with my mom and dad and finally got the last of my stuff changed from my parents' names to mine, got account information for everything, started directly talking to financial institutions myself... it was my 23rd birthday present to myself, and it was kinda scary. The number of financial books I had to read through for however many weeks at the Boston Public Library in order to psych myself up for that conversation was kinda ridiculous. I knew it was logical, I just needed repeated doses of reassurance that what I was doing was okay. It's perfectly fine for a young adult to take responsibility for her own finances.
It sounds silly, but it was a big step for me. Before then, I'd had my own savings/checking account that I'd semi-surreptitiously started when I turned 18 just to have a financial space of my own, and I think I was managing it pretty well - but boy, the conversation we had when they found out I'd opened that account without permission... I know it hurt them, and I had asked permission before and hadn't gotten it, and I thought it was the right thing for me to do, and I did. And it was yet another breaking-away from being the little girl they wanted to take care of.
I just had the one account, though. Everything else was with my parents, by my parents... when I had money I wanted to save (and I often did), I'd go to them and say "I put aside $X. I'd like to do $foo with it. Is that okay?" and they granted permission and took care of it. For which I'm grateful, mind you. I'm glad my parents taught me about saving early on, and about thinking ahead - to the point where you start thinking about your kids' college savings (or for me, my brother's kids' college savings) even before you yourself hit college age. But, as I pointed out last year, at some point I'd have to start making those phone calls myself, sit down with people and talk about The Future (financially speaking) myself... I'd been doing it already in a shadow-capacity for some time, and I was damn well ready for the real thing.
I'm still learning how to do this - and sometimes I'm struggling and I'm sure I'm making mistakes - but I am learning fast and just about as well as I can, I think. And it's better to make mistakes now while I'm 23 and years and years and years away from getting a house or retiring or anything like that. I'm building a foundation so that I can be an anchor and take care of the things I want to take care of later on. I'm making sure that I won't have to worry if I get sick, that I'll be able to pick up and move if I have to, that I'll be able to go to school if I want to, that I can hop on a plane without hesitation if family or friends need me to be there now. It helps that I don't have much, and it helps that I don't have anyone depending on me but myself.
So here's the way I think about it right now.
- I earn money. (Yay!)
- I put a bunch of it towards retirement right away. All the happy-tax options (401(k) and Roth IRA), as much as they'll let me.
- Then I put a bunch of it towards longer-term stuff I want someday - more retirement, school, maybe a house, maybe a round-the-world trip... I don't know. A car, when my 17-year-old vehicle dies. A motorcycle. (Heck, I might just get the motorcycle instead of a car.)
- And then I sit down and figure out expenses. I still remember how to live on next to nothing; I've gotten slack on doing that lately, what with buying a folding bike and a bass in the past year (two things I've wanted for years) and occasionally going for good food and dancing as a treat - but I can still do it, and I know exactly what to cut first if I ever need to cut anything. How much do I need to live (eat and sleep and get around town)? How much do I need for stuff that makes life easier and more educational and fun (scholarly society subscriptions, cell phone, website hosting)? How much do I set as a buffer for random things like food and movies, dancing, going out with friends, taking side trips, buying little things like shampoo and batteries, saving up for slightly-less-small things like the aforementioned bass and bike?
- Then I think about the places that I want to give to. Right now, there are two - my schools, IMSA and Olin. I donate mostly so that they can get me in as an alumni donor ("X% of our alumni gave") because I know the amounts I can afford right now won't actually make a difference. I give back more by volunteering, anyway. But these places made a big difference to me, and I want to give that back so they can keep making a difference to other kids, so... this is important in my book.
- Then I look at whatever is left and go "okay, what projects do I want to fund now?" This is where the SoaS pilot hardware at Cambridge Friends School comes from (now I have a test lab! woo!)
- And then I take the remainder and go back to step 3.
And I'm gradually finding ways to automate all this. I figure it's maybe 80% automated right now. It's just been a year, but... I'll get better at this over time. And I'm trying out suggestions for keeping track of it. (Thanks, Max. Spreadsheets are awesome.)
And then separately, I make sure that my transportation-stuff is fine (my bike's in good repair, my car's in good repair and insured) and that I'm covered health-wise (which... I have actually been terrible about; I haven't seen a doctor in a long time and should figure out a regular schedule for making sure that I'm okay, particularly given my family's medical history - maybe that's my project over the next year).
And I think that mostly covers stuff I need to do to Be A Grownup.
Okay. My head's on straight about this now. It's time to fill out Actual Forms.