You always look back and think “if I had known then what I know now.” I know I certainly do when it comes to several areas of my financial wellbeing. I compiled a few tips to help younger adults get a jump start on their future and avoid the consumer debt trap.
1. Start saving for retirement.
If you have access to an employer retirement plan, enroll now! Be sure to contribute enough to get the full employer match. If you have a part time job with no retirement plan, start contributing to a Roth IRA. You can automatically save the amount you would contribute and it will add up quickly! Any growth in a Roth IRA is tax-free and you can pull out your initial investment at any time. I worked full-time jobs in and out of college, but opted to not start saving for retirement. What a mistake! Even if you switch jobs, you can later consolidate most retirement accounts instead of leaving them with prior employer.
2. Build an emergency fund.
Save a decent amount in a savings account for emergencies that may come up to avoid credit card debt. This number will be different for everyone, but a good place to start is $1,000. Credit cards promise ease and benefits, but 0% interest for x number of months or charging what you can’t afford and paying it later always catches up. If it didn’t, credit card companies wouldn’t be in business!
3. Consider renting vs. buying.
It sounds so exciting to own your own home, but before you go down that road make sure it makes financial sense. When we first got married, we were renting a beautiful (but small) 2-bedroom home and loved the ease and the price. When we found out we were expecting our first child, suddenly we started to feel the pressure to hurry up and buy a home. But my advice before you make the plunge is to run the numbers and consider questions such as:
- Can you afford to fix the air-conditioner or dishwasher if they go out?
- How much will your mortgage cost compared to current rent?
- Will you live in this house long enough for it to make financial sense to purchase?
If any of my tips left you with more questions, give us a call. We do offer financial planning to help with piecing this financial puzzle of your preferred future together.