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Financial Tips for Young People | News, Sports, Jobs
One of the growing concerns of young people is their financial situation when it comes to reaching retirement age. For those in their 20s, 30s and 40s, below are several tips from a professional to help you set and achieve financial wellness goals.
When speaking with Matthew Yale, a financial advisor, he made it clear that one of the most prevalent issues when dealing with money for younger adults is that they may not understand debt, its different types, or exactly how their credit cards can work. It’s common to see many people carrying balances on their credit cards from one month to the next. Carrying a balance and paying the minimum balance due doesn’t seem like a big expense, but the interest adds up and much more is paid for in the long run.
There are many different types of investment accounts, but a great account that benefits younger people is Roth Individual Retirement Accounts, or Roth IRAs. Speaking about investing in general, Yale said it’s usually a wise decision to make your investments automatic in your 20s.
“You don’t think about it. Investing just happens. Set-it-and-forget-it is a wonderful thing to do early in your investing life. Just like your monthly Netflix bill, you won’t notice the money rolling into your investment accounts after a few months.”
A budget is probably the most useful tool for anyone when it comes to finances for a young person. “Spend less than you earn and find areas where you can cut back” is Yale’s “keep it simple” tip for budgeting. A budget allows you to take a daily, weekly, or monthly look at the money coming into your account and the money going out of it. Budgeting doesn’t have to be overly complicated, but it does need to be consistently tracked to ensure that your spending habits are aligned with your goals. Setting goals will be the driving force behind the decisions you make, so make sure your goals are set to help keep your financial habits in line. They don’t have to be big goals that take a significant amount of time or effort to achieve. They can be simple goals with short deadlines and still build the foundation for successful habits.
The concept of SMART goals comes to mind. SMART is an acronym that stands for “Specific, Measurable, Achievable, Relevant, and Time-Based.” Make sure the goals you set fit these criteria, and you’ll see yourself achieving measurable success when you achieve one. An example would be saying, “My family needs to limit eating out to two nights a week and put any money we save into a bank account. We can use any money we save to pay off our credit cards.”
When discussing retirement investment accounts, Yale mentioned IRAs, or Individual Retirement Accounts. He said that of the types of retirement accounts, the Roth IRA is probably the best for younger people. A Roth IRA allows an investor to pay taxes on deposits as they are made, rather than taxing them when they are withdrawn. The goal is to pay less tax on your investments, so that the initial investment is taxed rather than the hopefully larger amount that is withdrawn. One thing to remember about a Roth IRA is that there is an annual limit on how much can be deposited. According to the IRS, the limit in 2024 for those under age 50 is $7,000.
The great thing about investing for retirement is that the earlier you start, the better. Compound interest can work to an investor’s advantage to significantly increase their returns if they start early.
An emergency fund is also crucial to protect people from having to dip into savings or going completely broke after an emergency. Emergencies can be a wide range of things — medical expenses, vehicle expenses, appliance repairs or replacements, job loss, pets, or anything else that might apply to someone’s situation. According to Yale, three to six months of expenses is a good place to have an emergency fund for someone in their 20s.
Yale also discussed employee benefits. He said that if an employer matches contributions to a retirement plan, employees should take advantage of that and invest through a 401k or other plan. This brings to mind insurance. He explained that people in their thirties often face some of the most “messy” parts of their financial lives. For those with spouses and children, it’s important to consider life insurance in case the worst happens. Yale raised the question, “Are things sorted?”
Someone in their 30s should also be working to deal with “bad debt” like student loans, credit cards, etc. Your 30s can be a time to learn from your less financially savvy past self and better position yourself for the future in life.
For those in or nearing their 40s, Yale mentioned retirement investing again. He said there is “still time” and emphasized that a “late” start is better than no start at all when it comes to building a retirement nest egg. He emphasized that your 40s are a time to strive to reach your annual limit on retirement accounts, after other debts have been reduced.
Tracking your progress is an important factor when considering goals. The “M” and “T” in SMART goals mean that you should be able to measure your progress toward your goals over time periods. If you’d like to have a certain amount of debt paid off or a certain amount set aside in six months, make sure you’re tracking your progress so that you can meet any deadlines you give yourself. This can apply to any part of your finances, whether it’s investing, saving, paying down debt, or another aspect of a healthy financial situation.
“Don’t keep up with the Joneses,” Yale said, noting that the average new car purchase costs hundreds or nearly a thousand dollars a month in payments. Staying in debt by constantly upgrading vehicles is a significant burden on the bill. Consider an older or used model.
This talk also touched on the social media aspect of financial well-being. According to Yale, “all we see in today’s world with social media are the highlights,” which is fair. For those with serious financial goals, it might be a good idea to not worry about what others think of the car they drive or the gadgets they own. It might be time to simply work toward the goal and, when you do, treat yourself.
Finally, Yale said that if you’re unsure of where to go or what to do, professional help is available. Financial advice isn’t always necessary, he said, but he said “if you need help, there are tons of great financial advisors and resources in this area who would be more than happy to help you on your financial journey.” He emphasized that these goals aren’t hard and fast for different age groups, and different people may reach different goals at different times in their lives.
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