One of the most common problems that financial advisors see is when adults wait too long to begin their financial planning. We will always recommend that young adults begin working on their financial planning as soon as they can. This will help to prevent stress later on in their lives.
Financial Planning Tips for 20-Somethings
These are some simple ways to begin financial planning in your 20’s so that you can become more confident in your financial future.
1. Begin Retirement Planning
It is never too early to begin your retirement planning. If your workplace has a 401K plan, make the most of it. Also, you may want to consider starting on an IRA. Generally, we recommend that young adults open a Roth IRA, but this is a good conversation to have with your financial advisor. Your financial advisor will help you create a financial plan that suits your needs.
2. Begin Living Below Your Means
When you begin living beyond your means, it can become extremely dangerous. It is always better to begin saving now, by living below your means. Create a monthly budget to discover how much you are spending each month and how you could be saving money. Consider your spending habits how much your daily purchases are adding up. If you are spending $10 on lunch every day, you are spending about $2,600 a year on your lunch. Let’s say that you brought your lunch every day and the lunch you brought costs less than $2, you would only be spending $520 on your lunches. This saves you $2,080 every year! Being more mindful of how you spend your money could make a huge difference to your budget.
3. Pay Off Your Debt
Debt and college loans are one of the biggest problems facing most adults in their 20’s. It’s important to figure out a way to pay them off as quickly as you can. This is a good conversation to have with your financial advisor. Also, pay attention to your credit card use. It can be tempting to overspend on your credit card, but once you get into credit card debt, it can be seriously difficult to pay it off.
- Create an Emergency Fund
You never know when something disastrous may happen and you need money right away. Having an emergency fund (about 3 times your monthly salary) set aside can be relief during troubling or difficult times. Make sure that you only tap into these funds for emergencies.
Begin Your Financial Planning With a Financial Advisor
No matter what age you are, it is always going to be a good idea to work with a financial advisor to figure out how you could be saving and investing your money for a stronger financial future. A financial advisor can help you create the right financial plan and continue to monitor it, and advise you whenever they feel that changes need to be made. Just because certain events, such as retirement, feel as though they are a long way off, it doesn’t mean that you shouldn’t begin financially planning for them today.