When you’re young, saving for retirement may be the last thing on your mind. Yet, the financial choices you make in your 20s and 30s will dictate how well-off you are decades from now, and delaying retirement and estate planning until you’re older can be a decision you live to regret. Here’s how to start preparing so you’re ready for your golden years.
Money Management: Budgeting and Handling Debt
Living within your means is a habit best formed early in life, and it becomes even more critical when you’re earning a regular paycheck that must cover expenditures like rent, auto loans, insurance, and utility bills. To ensure you’ll meet your obligations, start by tracking your income and expenses; if the latter exceeds the former, you’ll need to either cut unnecessary spending or find a way to generate more earnings. Use your tracking to create a monthly budget, and then stick to it to avoid overspending.
If you’ve used credit wisely up to now, and you don’t carry any revolving debt, keep it that way. If not, add a line in your budget for paying down your cards so you don’t waste money on interest charges. Pay as much as you can above the minimum requirements, and remit payments on time to avoid fees and build your credit history.
Money Maximization: Saving and Investing
Once you have built a budget and are following it, you may be tempted to splurge with any extra cash. Although you shouldn’t live a life of hermetic deprivation, focusing on saving rather than spending will always have a better outcome long term. That’s because interest compounds, or builds on itself, so free money is added to what you’ve saved.
Speaking of free money, if your job offers a 401(k) plan, join it. It will make it effortless to build your savings, and if your employer provides matching contributions, then company money will be added to your plan every payday.
Buying a home is also a smart investment, as house values generally increase over time. Down the road, you can use your home’s equity as a source of liquidity when needed. When you’re ready to purchase, use a helpful online house appraisal to assess the asking price so you avoid overpaying and benefit fully from any appreciation.
Money Protection: Insurance and Estate Planning
Once you’ve committed to saving and investing for retirement, take steps to ensure you’ll hold onto that money until you or your loved ones need it. Always carry health insurance coverage, as medical debt can quickly deplete your savings. Having a life or disability insurance policy will also help preserve what you’ve accumulated if you die or become unable to work.
Although estate planning may sound silly when you’re beginning to save for the future, if you die without a will, your money may not go where you wish. By creating a complete estate plan when you’re young and then updating it when you marry, buy a home, have children or go through other life changes, you’ll rest assured that your assets won’t end up in the wrong hands.
No one ever says they wish they’d waited longer to be smart with their finances. By focusing on managing, maximizing, and protecting your money in your 20s and 30s, which may include taking advantage of your home equity or utilizing your 401(k) plan, you’ll set yourself and your loved ones up for a stronger financial future.
My Federal Retirement Help can assist you as you begin planning for your upcoming retirement. This way, you won’t have to spend your golden years worrying about your finances. Contact us today by calling 254-870-5959 Ext. 700 or texting 254-301-6571.