When you’re young you are likely just thinking about what's happening “right now” and that you have many years before you even have to think about your future retirement. However, one is never too young to save for the future. In fact, the sooner the better. You don’t need an economics degree to secure your financial future. You only need good old common sense. Below are 7 basic and tested rules to help you secure your nest egg.
- It's never to early or late to begin. Think back to 5 years ago and ask yourself how much you would have already saved for the future had you saved even a small amount each month. It’s never too early or too late to start saving but the sooner the better.
- Pay off debt. You will always have certain obligations each month such as; utilities, mortgage payments, or auto payments. But what about those charge cards? Do you pay off the balance on your cards each month? If not, just think of the savings you could have if you didn’t have to pay those interest charges each month.
- Create a budget. Include all of your monthly obligations in your budget as well as your holiday, vacation, taxes, insurance, and gift spending. Next figure out your monthly income and compare it to your expenses. Any extra money left over you can either put towards one of your charge cards to pay them off faster or put it in your savings account or 401(k). Watch out for impulse buying, try to stick to your budget.
- Emergency fund. No matter who you are, stuff happens. A good plan would be to have enough funds set aside for 3-6 months in a savings account or a no-load mutual fund that can be easily converted to cash if necessary.
- Safe and simple investments. If you need advice on investments, seek out a professional to help. Consider CD’s, mutual funds, or savings bonds as investments. Although mutual funds provide a range of stocks you should diversify your mutual fund investments into different types.
- Stick to the plan. Don’t expect a windfall from a jump in the stock market or interest rate changes, stick to investing a fixed amount each month. Monitor your investments so you can change directions when necessary.
- Include your spouse in the plan. If something were to happen to you it would be a nightmare for your spouse to figure out your financial affairs. Including your spouse when planning will also give you a fresh set of eyes to make realistic financial goals.
It's important to be patient. Rome wasn’t built in a day and neither will you create financial security in just a few months, it will take many years unless you hit a big lottery. Either way, if you’re not sure how get started, get a professional to assist you.
At Summit CPA we offer multiple resources to assist you with all of your tax and financial planning needs. Contact our office at 866-497-9761 to schedule an appointment with our advisors.