Financial Planning in Your 20"s and 30"s
Many people don't start thinking about retirement until they get close to it.
Financial planning should actually start on the first day on the job.
Here are some tips to help you get on the right track.
The early years - 20s When you start your first job, you know that you have plenty of time before you retire.
But don't let time get in the way and turn you into a procrastinator.
It is never too early to start.
While expenses are still minimal, get started on a budget.
Budget doesn't have to be a negative word.
A budget is simply designed to help you know where your money is going.
If you always have a plan for your money, you should never be without.
Set a plan for both short and long-term goals, and stick to it.
It is also time to get an emergency fund established.
You should set aside at least three to six months of living expenses for the "just in case" situations.
Remember what emergencies are, and don't dip into it for lack of patience and control.
Now that everyone is willing to lend you money, don't get caught in the credit card trap.
Open two or three general purpose cards.
Don't get department store cards.
Use only what you can afford to pay off each month, and always pay your balance in full.
You should also maximize your retirement savings.
While you're young, get into the habit of contributing to your employer's retirement plan.
Put in at least the amount that your employer is willing to match.
If you can afford more, do it.
You should also contribute to a Roth IRA.
Research the types of investments available and use a combination of mutual funds and exchange-traded funds (ETFs).
Do not purchase individual stocks and bonds.
The ability to diversify at this stage is too difficult, and you will increase your portfolio risk.
The family years - 30s By the time most of us reach our 30s, we have started our families.
These life changes bring on new responsibilities and new priorities.
Don't stop any of the financial strategies that you began in your 20s, but reevaluate everything and make the necessary adjustments.
Purchase life insurance to protect your spouse and children in the event of your unexpected absence.
We don't like to think about death in our 30s, but it is much better to ensure that your family is financially secure than to live in denial.
Consider your family's lifestyle and financial needs to make sure that you purchase the proper amount of coverage.
You should also consider your family's estate planning needs.
Set up a revocable living trust so that your assets can be passed on to your loved ones without going through probate.
As things change later in life, you can adjust the revocable trust as needed.
Next time, we will look at the next two groups - 40s and 50s.
The strategies may change, but the end result stays the same.
The sooner you start, the better.
But remember that it's never too late.
Financial planning should actually start on the first day on the job.
Here are some tips to help you get on the right track.
The early years - 20s When you start your first job, you know that you have plenty of time before you retire.
But don't let time get in the way and turn you into a procrastinator.
It is never too early to start.
While expenses are still minimal, get started on a budget.
Budget doesn't have to be a negative word.
A budget is simply designed to help you know where your money is going.
If you always have a plan for your money, you should never be without.
Set a plan for both short and long-term goals, and stick to it.
It is also time to get an emergency fund established.
You should set aside at least three to six months of living expenses for the "just in case" situations.
Remember what emergencies are, and don't dip into it for lack of patience and control.
Now that everyone is willing to lend you money, don't get caught in the credit card trap.
Open two or three general purpose cards.
Don't get department store cards.
Use only what you can afford to pay off each month, and always pay your balance in full.
You should also maximize your retirement savings.
While you're young, get into the habit of contributing to your employer's retirement plan.
Put in at least the amount that your employer is willing to match.
If you can afford more, do it.
You should also contribute to a Roth IRA.
Research the types of investments available and use a combination of mutual funds and exchange-traded funds (ETFs).
Do not purchase individual stocks and bonds.
The ability to diversify at this stage is too difficult, and you will increase your portfolio risk.
The family years - 30s By the time most of us reach our 30s, we have started our families.
These life changes bring on new responsibilities and new priorities.
Don't stop any of the financial strategies that you began in your 20s, but reevaluate everything and make the necessary adjustments.
Purchase life insurance to protect your spouse and children in the event of your unexpected absence.
We don't like to think about death in our 30s, but it is much better to ensure that your family is financially secure than to live in denial.
Consider your family's lifestyle and financial needs to make sure that you purchase the proper amount of coverage.
You should also consider your family's estate planning needs.
Set up a revocable living trust so that your assets can be passed on to your loved ones without going through probate.
As things change later in life, you can adjust the revocable trust as needed.
Next time, we will look at the next two groups - 40s and 50s.
The strategies may change, but the end result stays the same.
The sooner you start, the better.
But remember that it's never too late.