How to Keep a Good Financial Start Going

•  Participate in the company 401(k). Brown recommended Harris take the 401(k) plunge. Ideally, at her age she should have an aggressive asset allocation of 80% stocks and 20% bonds, but given Harris’ risk tolerance Brown suggested 65% stocks and 35% bonds. She should start by putting 5% in her 401(k), about $150 a month, which leaves around $200 of discretionary income.

Investing early and often is a recipe for a strong financial foundation because your money has time for maximum growth. “The power of compounding over 40 to 50 years—it doesn’t compare to anything else,” says Brown.

For example, if at age 25 Harris saves 5% and has a 65% stock, 35% bond portfolio, by 65, she should have about $340,000, Brown estimates.

When she is ready to invest outside of her 401(k), Brown recommends a Roth IRA because she is in a low tax bracket now. “It’s better to pay taxes at lower rates now, compared to later when she is in a higher tax bracket. Also, Roth contributions can always be taken out without penalty, which makes that money accessible if needed,” Brown says.

• Research the real estate market. As much as homeownership is a laudable goal, Brown says Harris’ dream of getting that accomplished in two years at the price she’s looking for is unrealistic. Harris found listings in New Rochelle, New York in the $39,000 to $50,000 range that were 300 to 500 square feet; the least expensive one was a foreclosure, and the listings in this price range were co-ops, not condos. “I’m not sure she understood they are different. When I went online for condos in the area, they were more like $199,000 and up for 700 to 800 square feet,” Brown says.

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