It’s never too early to start thinking about saving for retirement and generating wealth.
Because we simply never know which twists and turns life will take, it’s always important to start saving, using money wisely, and even investing in order to achieve financial security.
Financial security and peace of mind are goals that we all strive for, or should strive for, at some point in life. So why not get a jump start?
If you’re a young professional who is just starting out on a career, then there are several important steps you need to take in order to embark on the path toward financial freedom.
In this blog, which is the first in a three-part series on smart things to do with money at different stages in life, we’re going to be taking a look at a few high return investments and saving tips for young professionals in their 20’s.
When we’re young, we tend to be a little more reckless with our money, and we often have a tendency to think more in the present than ponder our future. But by following a few of these tips, you might be able to set yourself up for more success and financial bliss than you ever could have imagined. Let’s take a look.
Tackle Student Loans
If you’re among the 44 million students in the United States who make up the $1.3 trillion in student loan debt, you may want to start right there. After graduation, we often feel the pressure to get a job right away because we know that those student loans are going to come for payment sooner rather than later. So, as soon as you land your first gig (hopefully it’s the job of your dreams), it’s imperative that you start eating into those loans as much as you can. You can’t experience financial freedom if you have debt, after all, and one of the smartest things you can do is to pay off your student debt as fast as possible. Not only will this help your credit, it will also free you from the shackles of debt and allow you to save more in the future.
Make A Budget
As a member of the younger part of the workforce, it’s likely that you don’t have as many expenses as some of your older colleagues. Thus, you may have the temptation to spend that extra cash on things like vacations, video games, and other wants (rather than needs). And that’s OK, to some extent. However, it’s still important that you have a strict budget that you stick to. You can’t spend more than you make (read: credit cards aren’t always a great idea), so be sure to map out your monthly expenses and allocate your income wisely. Be sure you have enough to meet your needs, while still allowing some money for extracurriculars and savings.
Sign Up For Your Company 401K
More than likely, you have already discovered that your company offers a 401K plan as part of its employee benefits package. It’s crucial that you get started on that as soon as you can, because there might even be some free money in it for you. That’s right — some companies will match contributions up to a certain percentage, so it’s wise to investigate this possibility. Even if not, a 401K plan is a good way to start saving for retirement in a tax-deferred manner. Often times, your contribution is taken right out of your paycheck, so you never even notice it’s gone. Build your monthly 401K contribution into your budget and you’ll be good to go.
When it comes time to find transportation to and from your job, you may be pondering the various public transportation options in your city. However, as more and more younger professionals are getting jobs which require a longer commute, you may find yourself in a position where you need a car of your own. If that’s the case, remember that cars only tend to depreciate in value, and it may be better for your current budget to buy or lease a used car. While you need a reliable vehicle, it would be a smarter investment to go this route rather than splurging on a new car that you simply can’t afford.
Explore High Return Investments
Even though you may think simply contributing to a 401K account will be enough, that likely won’t prove to be true in the long run. While a 401K will be a nice supplement to have in the future, you’ll need much more than what you’re allowed to contribute annually in order to experience financial freedom in retirement.
It’s a wise idea to explore the many other high return investments out there, even in your 20’s. From starting your own Individual Retirement Account (IRA), to even dabbling in things like bonds and annuities, starting sooner rather than later will give you a leg up and help you earn the peace of mind you crave.
A good rule of thumb for savings is to allocate 15 to 20 percent of your annual salary to your various accounts, whether it be a 401K, IRA, or other savings vehicle, so keep that in mind as you calculate your budget and explore the many options out there for saving money as a young professional.
Contact Tactical Wealth for more information on the high return investment strategy we offer, and maybe you’ll find it’s worth exploring when the time is right.
Stay tuned for part two in this series, which takes a look at a few smart things to do with money in your 40’s.