A Good Place to Start

The deal on your first car: Buy one that's used, with a loan of no more than 48 months.
The deal on your first car: Buy one that's used, with a loan of no more than 48 months. (By Emile Wamsteker -- Bloomberg News)
By Michelle Singletary
Thursday, June 14, 2007

There is a Chinese proverb that says, "Personal example carries more weight than preaching."

Not that preaching doesn't work. But if you want to prove your point, live what you preach. And if you live what you preach, people will want to emulate you.

That certainly is the case with one Richmond reader who wrote to me recently: "I am in my early 20s and many of my friends have started looking to me for financial advice because they know that I am very frugal and I was able to buy a house a few months ago. I truly want to help them because it seems so easy to start now at our age when we don't have families or other huge financial responsibility. How do you help friends and family that inevitably ask you for help?"

The question is so timely considering the many college graduates who are starting their first real-world jobs this summer. Yet I wonder how many are equipped to tackle the laundry list of decisions they'll have to make about their personal finances.

The fact is that many will begin their working lives making huge money mistakes. Perhaps the following advice will help change their financial course:

· Forget how you were raised. One of the biggest mistakes young workers make is to try and duplicate right away the life they had at home with their middle- and upper-income parents. Because many can't recapture that lifestyle with their incomes, they do it with credit. Right after college, continue to live as you did as a broke student. In time, with the right money management, you'll be able to elevate your lifestyle.

· Use direct deposit to save. Don't be hardheaded. Set up an automatic system to save at least 10 percent of your income every paycheck. Put the money in an account separate from the ones you may use for your regular expenses.

· Whenever you get a bonus or raise, divert part or all of that money (the net, minus taxes) to that separate savings account. That's called living below your means.

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