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Freedom for Retirement™ is the podcast designed to help you move beyond the fear of the complexity of finances so you can be financially free to achieve personal significance. Tune in with Josh Duncan each week to turn fear into fuel that drives you into Freedom & Significance.
Welcome to the Freedom for Retirement podcast. If you're a high earning professional, business owner, or someone approaching retirement and wondering whether you are truly on track, you are in the right place. This podcast is all about helping you make smart, confident financial decisions without the fear, confusion, or sales pressure that so often comes with money advice. Each episode is designed to break down complex topics like retirement planning, investing, taxes, and cash flow in plain English so you can understand what really matters and avoid the most common and costly financial mistakes. Everything you hear here is educational, fiduciary focused, and grounded in real world planning experience working with clients just like you.
Josh:I'm your host, Josh Duncan, partner at F5 Financial Planning. Let's get started.
Josh:Hey, everyone. Before we dive in today, I wanna give a quick shout out because this video actually came from a request. A college student reached out and asked if I can do a video specifically aimed at people in their shoes. And honestly, I thought it was a great idea. So if you're in college or you know someone who is, this one's for you.
Josh:There is so much personal finance content out there that is written for 35 year olds. It assumes you already have a job, a four zero one k, maybe a mortgage. And if you're 20 years old trying to figure out how money actually works, most of that advice just doesn't apply yet. But here's what nobody talks about, and I mean this. The financial decisions you make in your early twenties can have a bigger impact on your long term wealth than almost anything you'll do later.
Josh:Not because the dollar amounts are large, they won't be. But because of one thing that you have right now that no one else can buy back, time. Plus, building good habits earlier in life can make it easier to make good financial decisions down the road. So in this video, I'm gonna walk through six foundational areas every college student should understand. We're gonna talk about building a financial foundation, managing debt, budgeting and avoiding lifestyle traps, understanding your taxes, starting to invest, and building toward a strong career and income.
Josh:By the end of this video, you're gonna have a clear practical roadmap, not theory, not fluff, actual steps you can take this week to start building real financial momentum. Let's get into it. Let's start at the very beginning, and I mean the actual beginning. Before you think about investing, before you think about retirement accounts, before any of that, you need a financial foundation, and it starts with one simple thing, a bank account that works for you, not against you. Here's what I want you to do.
Josh:Open a checking and savings account with an online bank. Not the big national bank that has a branch on every corner, an online bank. The reason is straightforward. Online banks have dramatically lower overhead costs, and they pass those savings on to you in two ways. First, no fees.
Josh:No monthly maintenance fees, no minimum balance fees, none of that. Second, they typically offer high yield savings accounts, which right now can pay significantly more interest than a traditional savings account at a brick and mortar bank. We're talking rates that can be ten, fifteen, even 20 times higher than what a big bank pays you on a standard savings account. Some popular options you've probably heard of include Ally, Discover, SoFi, and American Express. But do your own research because rates change.
Josh:Just search best high yield savings accounts or best online banks, and look for a reputable financial comparison site. Now, once you've got those accounts open, here's your first financial goal. Build a $1,000 emergency fund in your high yield savings account. That's it. Just $1,000.
Josh:I know that might sound like a lot right now, and I know you might be thinking, Josh, I'm a pro college student. I hear you, but this is the single most important financial safety net you can build at this stage. And here's why. Life happens. Your car breaks down, your laptop dies, you have an unexpected medical expense.
Josh:Without even a small cushion, those events force you into debt, and debt is what we're trying to avoid. $1,000 won't cover everything, but it will cover most of the small emergencies that derail people and push them into a credit card. So before you do anything else financially, before you invest a single dollar, get to $1,000 in savings. That's your foundation. Now while you're getting started with your financial life, I want to teach you something that shockingly few adults actually understand, how to read a pay stub.
Josh:When you get your first real paycheck, whether it's from a part time job, an internship, or your first full time role, you're gonna see two very different numbers. The first is your gross pay. That's what you actually earned. Your hourly rate times your hours or your salary divided by your pay periods. The second number is your net pay.
Josh:That's what hits your bank account. And the difference between those two numbers, that's where the education happens. You'll see deductions for federal and state income taxes. You'll see something called FICA, which stands for Federal Insurance Contributions Act, and that covers Social Security and Medicare taxes. Social Security is 6.2% of your gross pay, and Medicare is 1.45%.
Josh:Those come out automatically, every paycheck, no exceptions. You and your employer pay the same percentages of each of these taxes. Understanding this early changes how you think about money. When you negotiate a salary and someone says $60,000 a year, you need to know that that's not $60,000 in your pocket. After taxes and deductions, it might look more like 42 or $45,000, depending on your state and situation.
Josh:Knowing that going in makes you a smarter negotiator and a smarter budgeter. Okay. Let's talk about debt. And I want to be direct with you here because I think a lot of financial advice around debt is either too soft or too complicated. If you have student loans, your number one debt priority is paying those off.
Josh:Not aggressively necessarily. We'll talk strategy in a moment. But your focus should always be on reducing what you owe, not accumulating new debt on top of it, which brings me to credit cards. I'm gonna say something that might surprise you coming from a financial planner, do not get a credit card in college. I know there's a lot of content out there telling you to build your credit score early, earn reward points, and all of that.
Josh:And those things have their place eventually. But here's the reality. The risk of carrying credit card debt at 22 or 23% interest massively outweighs the benefit of a slightly higher credit score or a few airline miles. I've seen it before. People in their late twenties and early thirties still carrying credit card balances they ran up in or right after college.
Josh:That debt is expensive, and it compounds against you. Build your credit score through other means, like simply paying your bills on time and keeping your student loan accounts in good standing. The credit card can wait. Plus, you don't really need a credit score, contrary to popular opinion. Now, on student loans specifically, I wanna make a point that I think is important and not enough people say out loud.
Josh:If attending your current school requires taking on more than $10,000 in student loan debt per year, you should seriously consider whether that school is worth it. I'm not saying college isn't worth it. I'm saying not all college is worth the same price. A degree from a school that cost you $70,000 in loans is not the same financial decision as a degree from a school that cost you $15,000 in loans, even if the piece of paper looks similar. Community college, in state schools, and transfer pathways are genuinely great options.
Josh:The student loan crisis in this country is real, and it starts with decisions made at 18 and 19 years old without a full picture of the long term financial consequences. Be willing to ask hard questions about your school choice. If you fall in love with the school, you are likely to get taken advantage of and pay whatever amount they ask. The school doesn't love you back. Finally, know your loans.
Josh:This sounds obvious, but many borrowers have no idea what they actually owe or what they're paying. There are two main types of federal student loans. Subsidized loans, these are need based, and the government pays the interest while you're in school. Unsubsidized loans, these accrue interest from day one even while you're still in class. Know which type you have, know your interest rate on each loan, and know who your loan servicer is.
Josh:Your servicer is the company that manages your repayment. You should be able to find all this information at student aid dot gov using your federal student aid login. This is not exciting stuff, I know, but knowing the details of what you owe is the first step to getting out from under it. Let's talk about budgeting and what I call lifestyle traps because this is where a lot of financial plans quietly fall apart without anyone noticing. First, the basics.
Josh:You need to know where your money's going. I know budgeting sounds boring, and I know there are hundreds of apps out there that promise to do it for you. And honestly, some of them are really good. Tools like Monarch Money or YNAB, You Need a Budget, can actually import your transactions and help you see your spending patterns. Or if you want a simpler approach, just download your bank transactions into a spreadsheet once a month, and then ask an AI tool like Chad GPT or Claude to help you categorize and summarize the spending.
Josh:It takes maybe fifteen minutes and gives you a clear picture of your habits. The goal isn't to make budgeting your hobby. The goal is just awareness. Most people, when they actually look at their spending, are surprised. Usually, not in a good way.
Josh:Now, here's the trap I want to spend a minute on because it catches almost everyone, lifestyle inflation. When you land your first real job and this moment is coming, the salary is going to feel like a lot of money. Maybe it's $40,000, maybe it's 60, maybe it's more depending on your field. And compared to surviving on a part time job in college, it is a lot. The problem is that most people immediately upgrade their entire life to match that income.
Josh:Nicer apartment, new car, better restaurants, wardrobe, travel, and before long, the big salary feels like just enough. This is lifestyle inflation, and it is the silent wealth killer. I remember my first job out of college with Caterpillar. So many of the new hires right out of college bought a new car within their first year of employment, including yours truly. Looking back, I wish I would have kept driving the car I had.
Josh:Here's the antidote for the lifestyle inflation, delay upgrading your lifestyle until your financial foundation is solid. Keep living like a college student or close to it for the first year or two after graduation. Use that gap between your income and your spending to build savings, pay down loans, and start investing. The people I've seen build real wealth in their thirties and forties almost universally made this choice in their mid to late twenties. One more thing I wanna flag, subscription creep.
Josh:Go right now and add up every recurring charge on your bank or credit card statement, streaming services, apps, subscription boxes, cloud storage, software trials you forgot to cancel. For most people, this number is shockingly high. Often anywhere from 100 to $300 a month, and half of it is things they barely use. Audit those charges every few months, cancel what you don't need. It's not about being cheap.
Josh:It's about being intentional. Alright. Let's spend a few minutes on taxes. And before your eyes glaze over, stick with me because this knowledge pays dividends your entire life. Here's what I want you to know.
Josh:Tax knowledge compounds. The earlier you understand how taxes work, the better every financial decision you make becomes. When you understand how your income is taxed, you make smarter choices about retirement accounts. When you understand deductions, you don't leave money on the table. When you understand how investment gains are taxed, you invest more strategically.
Josh:It all connects. So where do you start? Start with the basics of filling out a tax return. Even if your situation right now is simple, a w two from a part time job and not much else, Go through the process yourself at least once. You don't have to be confused by it.
Josh:The IRS actually has a tool called IRS Free File. And if your income is below a certain threshold, which for most college students it will be, you can file your federal return for free using guided software. So go to irs.gov and search for free file to see if you qualify. A few things worth knowing as a college student. Your parents may or may not claim you as a dependent, and that affects whether you can claim certain credits on your own return.
Josh:If you receive scholarships or grants, part of that money may actually be taxable, specifically anything above tuition and required fees. And if you had any freelance income, gig income, or side hustle money, anything where you were paid without a w two, you'd likely have self employment income tax obligation, and may need to report it. I'm not gonna go deep into the weeds on all of this, but here's my practical advice. File your own return at least once, even if it's simple. Use free file if you qualify.
Josh:And if you have anything unusual, like significant investment income or freelance work, consider sitting down with a tax professional once. Just to make sure you understand your situation. The cost of a one time consultation is almost always worth it. Now, we get to the part that I am most excited to talk about, because this is where the math starts working dramatically in your favor. If you have any earned income, meaning w two wages from a job or 10 99 income from freelance for gig work, you are eligible to open a Roth IRA.
Josh:And I want you to open one. Let me explain why. And I'm going to use a simple example to make numbers real. Let's say you're 22 years old, and you start contributing just $100 per month to a Roth IRA. That's $1,200 a year, assuming an average annual return of seven percent, which is roughly in line with long term stock market averages after inflation.
Josh:By the time you're 65, that account could grow to somewhere around $320,000 from $100 a month. Now, let's say you wait until you're 30 to start doing the same exact thing, same contribution, same return, End up with about $160,000. That's $160,000 less just from waiting eight years. Time is the most powerful force in investing. Not picking the right stocks, not timing the market, just starting early and being consistent.
Josh:The Roth IRA is the right vehicle for most young investors for one key reason. You contribute after tax dollars now, and everything grows completely tax free. When you're in your twenties, you're probably in a lower tax bracket than you'll be in your peak earning years. So paying tax now, walking in tax free growth for the next forty plus years, that's an incredible deal. As of right now, you can contribute up to $7,000 per year to a Roth IRA as long as your earned income is at least that much.
Josh:You don't have to max it out right away. Start with whatever you can. $25 a month, 5,100. The habit matters as much as the amount. Once you have the account open, invest in low cost diversified index fund.
Josh:You can find these through companies like Vanguard, Fidelity, or Schwab. Don't overthink it. Don't try to pick individual stocks. Just invest consistently in a broad low cost fund, and let time do the heavy lifting. This one thing I hear most often that keeps people from starting, I'll start when I have more money.
Josh:Please do not wait. The cost of waiting is enormous, and we just did the math. However, get your $1,000 emergency fund in place before you start investing. Okay. Last section.
Josh:And in some ways, this is the most important one of all. Everything we've talked about, the savings account, the budget, the Roth IRA, all of it is powered by one thing, your income. And in your twenties, your most valuable financial asset is not a savings account or an investment portfolio, it's your earning potential. Think about it this way. If you earn $50,000 a year for the next forty years, that's $2,000,000 in lifetime income before you invest a single dollar.
Josh:If you increase that to $75,000 a year, it's 3,000,000. A one time decision choosing the right career path, getting the right credential, making the right move can be worth hundreds of thousands of dollars over your lifetime. No stock pick will ever beat that. So invest in yourself, invest in skills that are in demand in your field, build relationships, and network intentionally. Not in a cheesy transactional way, but by genuinely connecting with people who are doing what you wanna do.
Josh:Find a mentor if you can. Internships and early career experiences matter enormously, not just for the paycheck, but for the career capital they build. And when you get your first job offer or any job offer, negotiate. I wanna be direct about this. The majority of people, especially young people, do not negotiate their salary.
Josh:They feel uncomfortable. They're afraid the offer will be pulled away. They don't know what to say. But negotiation is expected. Employers make initial offers with the expectation that there will be some back and forth, and the stakes are enormous.
Josh:A 5,000 difference in starting salary over a career of compounding raises can be worth hundreds of thousands of dollars. Negotiating a single job offer might be the highest return conversation you ever have. The framing I wanna leave with you on career and income is this. Every financial decision you make in college should have your future income in mind. Your degree, your internships, your side projects, your networking, your skills, these are investments in the most important asset you own, which is your future earning power.
Josh:Alright. Let's bring it all together. We've covered a lot of ground today, and I want to summarize the six key things I want you to walk away with. Number one, build your foundation. Open an online bank account.
Josh:Start a high yield savings account, and make $1,000 your first savings goal. Learn to read your pay stub, understanding gross versus net pay, your tax withholding is knowledge that will serve you for life. Number two, manage debt wisely. Know your student loans, the type, the rate, the servicer. Stay away from credit cards for now, and honestly evaluate whether your school is worth what it costs.
Josh:Number three, budget and avoid lifestyle traps. Know where your money is going, delay upgrading your lifestyle until your foundation is solid, and audit those subscriptions. Number four, understand your taxes. File your own return, use IRS free file if you qualify, Tax knowledge compounds, and the sooner you develop it, the better every future financial decision becomes. Number five, start investing now.
Josh:Open a Roth IRA with any earned income you have. Contribute whatever you can consistently. The math of compounding is ruthless. It rewards those who start early and penalizes those who wait. And number six, invest in your career and your income.
Josh:Negotiate every offer, build skills, build relationships. Your earning potential is your most valuable financial asset, and every smart decision you make in college is building the income that would fund the rest of your life. Here's the thing I wanna leave you with. Most people don't learn this stuff until they're in their thirties, and by then, they've already made some expensive mistakes. A few smart decisions now, even small ones, can genuinely change the entire financial trajectory of your life.
Josh:That's not an exaggeration. That is just the math.
Josh:If you found this episode helpful, please consider subscribing to the podcast and leaving a review. It helps more people find the show and continue learning how to make smarter financial decisions. I'm Josh Duncan, partnered F5 Financial Planning. If you would like to learn more about how we help our clients achieve financial freedom for personal significance, please visit our website at www.f5fp.com. Thanks for listening, and I'll see you in the next episode.