I made more money in my early 20s than most of my Generation-X peers. As an independent contractor in the 1990s, though, I was at a financial disadvantage when it came to financing a home and receiving benefits that come with a full-time job. In my 20s, I was also dealing with student loan debt and credit card debt that I acquired during college. Paying debt often took a big chunk of my monthly paychecks that ranged from $3,000 to $5,000.
Although I lost some flexibility and freedoms when I started a full-time job in my late 20s, I was able to finally make my best money moves that I had delayed until then.
Setting up a 401(k)
My first money move when I got my full-time job was to set up a 401(k). Although I never had access to an employer-sponsored retirement plan in the past, I had just started contributing to a Roth IRA. The Roth IRA was a new investment option on the scene in the late 1990s. With the 401(k), I could enjoy receiving a company match to a percentage of my contributions. In the past 10 years, I watched my 401(k) grow from nothing to about $75,000. I don't think I would have saved that much money on my own without the ease of the money automatically being deducted from my paycheck.
Buying a home
When I tried to obtain a mortgage in my 20s, I was denied. Having too much credit card and student loan debt was one factor. But even after I paid off my debt, I was denied because my independent contractor work was viewed as being too unstable. Even though I made only half as much money with my full-time job, the banks viewed my situation as much more financially stable. I only had to rent an apartment and hold down the full-time job for one year before my mortgage loan application was approved. Buying a home was another good financial move that allowed me to build wealth.
Opening a health savings account
When I was an independent contractor, I paid out of pocket for my medical expenses. In some cases, I had to use a credit card to pay for unexpected trips to the urgent care clinic. After getting a full-time job I decided to sign up for a health savings account. My company contributed $500 a year to the account. I also had money deducted from my paycheck. Having a health savings account has provided me with a sense of financial security that I never felt when I was on my own.
When I first learned what the starting salary was for my full-time job, I was shocked. I was used to making twice as much. Still, I soon discovered there are hidden financial benefits to having a full-time job that I had considered when I was younger. In addition to receiving health benefits, my employer also paid for expenses. I received free money in the form of matches to my 401(k). Also, I was finally able to know what it was like to receive a paid vacation and paid sick days. Perhaps the only myth was that my full-time job would provide a feeling of job security. With the recession, any sense of security was thrown out the window as layoffs became commonplace.
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- Banking & Budgeting
- independent contractor