Your life beyond the 9-5 may seem far away now, but your retirement years are rapidly approaching. Your 20’s are not the only time you should be living it up, invest in yourself to ensure your adult years are just as fun as your youth.
Track Your Spending and Create Realistic Goals
Every journey toward a financial milestone begins with a serious evaluation of how you are spending your money. Be cut-throat and honest with yourself with every purchase. Follow the advice of JAY-Z. He says, “if you can’t buy it twice, you can’t afford it.”
It’s time to be diligent about sticking to a budget that works for you, so you can start maximizing your savings.
It is essential to make goals for yourself that are attainable. Create a 10-year plan with goal checkpoints at every year so you can see results to push you through completing your savings goals.
It’s likely that every established adult in your life has given you this advice, but we’re here to drill it into you again.
We know that taking on student debt is a necessary evil many have to endure to get an education. If you’re in this boat, avoid all other debt like the plague, specifically credit card debt. Be responsible with your credit- your future self will thank you.
How can you avoid debt? Stick to your budget and create an emergency savings fund worth three months of expenses. Keep this cushion for emergencies like job loss or medical debt.
Take Advantage of Your Job’s Saving Plans
Does your employer offer a 401(k)? Take it.
Just because you are young and projected to move across different companies before your career is solidified does not mean that you should pass up opportunities for a retirement plan.
These employer- sponsored savings plans allow you to save automatically and benefit from tax breaks. Most 401(k) providers allow you to simply transfer your 401(k) funds to another program without any tax penalties.
Make Your Saving Automatic
While important, a 401(k) is not enough automatic savings. As soon as you’re settled into a “big kid job” make sure that your paycheck is dispersed to your checking and savings accounts appropriately.
Make sure that a portion of your paycheck is automatically divided into your savings account.
Shoot for 20% of your paycheck to go to savings, but if your budget allows for more than that, make sure everything possible is going to your savings. If your budget isn’t quite at a 20% savings expectation, do whatever you can.
Open an IRA
Create your Individual Retirement Account and start contributing as much as possible. What’s the difference between an IRA and a 401(k)? The answer is simple. A 401(k) is an employer- sponsored perk of the job that you can opt into, and an IRA is a retirement plan you can open for yourself with no employer involved.
Do you need both a 401(k) and an IRA? If you want to retire young, yes.
Contributing to a 401(k) and an IRA is like your retirement having two streams of income. Max out your monthly IRA contributions to retire as fast as possible.