Why do I need to think of Financial Planning if I’m only 20 something’s?
If you’re in your twenties, you should feel relieved that you’ve stumbled upon the idea of financial planning. You have a head start on life, retirement and a way to become financially independent at an early age.
By now you are probably already living on your own, paying your own bills and creating credit.
This is the time to start thinking about the future because if you plan carefully and frugally, you could actually retire at a young age. Imagine being financially stable at the age of forty! With the next twenty to fifty years ahead of you, stress free and full of enjoyment and travel.
Here are some financial planning tips to get all of you 20 something’s on the right track to early retirement, financial stability and a future that is bright:
Tip #1 – Get Income Protection insurance
This one single thing can save you from losing everything you’ve saved should you experience an illness, job loss and much more. Some people who become ill can use their entire savings account on medical expenses. Get this insurance now – for peace of mind and to hold onto your hard earned savings.
Tip #2 – Set goals
Without goals, you’re less likely to get anywhere. Knowing where you want to be financially, in ten, twenty and even fifty years can be determined by setting goals as to how much you will need to put aside to reach that dream.
Create a budget that shows how much money comes in, how much goes out and how much you should be saving every month. If there isn’t much left over it’s probably time to take on a second job, or start shaving expenses.
Tip #3 – Save, save, save
With your budget you should know exactly how much money you can save each month and how much spending money you have. Do it – and if you reach your spending limit, then don’t buy that new app, or go to that dance club. It is as simple as that.
Tip #4 – Eliminate debt
From student loans, to house payments and credit cards – paying this debt down is the only way you’re going to retire early. When you’re paying credit cards, mortgages and student loans, interest is adding up, keeping you in debt.
To be effective in eliminating debt, make a list of the smallest to the largest bills you have, and pay them off, small to large. Once you get the smaller ones paid, the biggest ones can come down a lot easier.
Tip #5 – Live inexpensively
Find the cheapest place, and drive the least expensive car you can bear. Don’t worry, when you get older you can find something nicer, but for now, you are in save mode and living within your means. You’re not racking up credit cards on fancy clothes and shoes, and you’re only spending money on a weekly or monthly outing.
Tip #6 – Emergency fund
This is the single most important plan. If something were to happen to your vehicle, your job or you get hurt, an emergency fund can save you thousands in the long run. If you have a problem and use your credit card, you’ll be paying for it for years with interest included.
An emergency fund that is designed for the kinds of emergencies you might expect could save a ton in credit card interest, and a bill that could take years to pay off.
Tip #7 – Start a retirement account
A great reason to start a retirement account is ‘compound interest’ which can really rack up the savings. For example, if you were to save $400 per month, between the age of twenty-five and sixty-five – with an interest of 8% on your savings, you could end up being a millionaire by sixty-five years of age, or sooner.
Make sure you talk to an experienced financial planner first. There are a lot of accounts and inside information you’ll need to know before investing.