Oh To Be Young! For 23 – 30 year olds, the opportunity to achieve financial nirvana is at hand! The great wealth transfer from Baby Boomers to the next generations has begun, with an estimated $41 trillion to change hands.
If you are one of the fortunate ones to be on the receiving end of the largess, hooray! But, if you’re like most Americans, you’ll be working hard for your money. Access to investment information and financial advisors is really unprecedented so getting in the game has never been easier.
Here are just six easy steps for getting started:
- Follow the cardinal rule of saving at least 10% of your income and build up a savings or emergency fund. It is recommended that you have about three months of living expenses in savings put aside for the just-in-case.
- If you live at home and are fortunate enough not to have to pay rent, act like you are and put the money into savings. If you’re renting an apartment, get a roomy and split the costs of rent, utilities and food. While it’s a luxury to have your own place, saving on housing early will allow you to save for a down payment for when you’re out on your own someday.
- Take advantage of employer retirement plans if available. Auto save a percentage of your income each month at least up to your employer match which is between 3-6%. We can’t stress it enough – the key to financial success is saving early and saving aggressively while young. But don’t stop there. Increase the amount you contribute to saving every year. If your employer doesn’t offer retirement savings options, open a Roth IRA. You’ll have no regrets about doing that.
- If you have money saved, and you are participating in your employer’s plan, then open a Roth IRA and start to put a monthly amount in. Start with what you can and increase it as you go. Open a Roth IRA and just start saving. If you are under 50 years old you can put up to $5500 in a year.
- Use credit cards wisely – pay your balance off monthly. Build a solid credit history worth bragging about. Sure, carry a major credit card, but avoid individual store or merchant cards that tend to impose very high interest rates. They can be tempting particularly when paired with an incentive such as immediate discount on purchases. However, because each card you carry increases the amount of credit you can access, having multiple cards can lower your credit score. Yup…it’s a dastardly plot.
- Read! Books like The Financial Wisdom of Ebenezer Scrooge, by Ted Klontz and Wild Money by Luna Jaffe. These are quick reads, full of great tips and can help you understand your relationship with money. You’d be surprised how eye opening, and liberating, that can be!