Is there someone in your life that is in their 20s? Those people are just finishing up their academic career, and starting out in the workforce. Even though their working life is barely starting, they need to start thinking about that time that they will no longer want to bring in a paycheck. In the 20s may seem a bit early to start retirement planning, but many financial planners will tell you that starting as early as possible can help alleviate many headaches in the future.
If you want to help out the 20-somethings in your life, share the following money advice with them:
Spend less than you earn.
When you first start getting a paycheck, you might think that the amount on that you receive is the amount that you can spend. This is actually far from true. Instead of going broke between paychecks, try to live below your means – even if you have the money to go to an expensive and fancy steak dinner, save your money and order some takeout Chinese, or (even better) cook for yourself. The less money that you spend, the more you will be able to save.
Make saving part of your budget.
In the same thread, you should make a certain amount of saving a part of your budget. Figure out how much out of each paycheck that you can put into your emergency fund or retirement account, and move it over as soon as you are paid. That way, you can guarantee that it will be saved instead of spent.
Have a financial parachute.
An emergency fund is absolutely necessary. You never know when the worst will occur, so you should have a financial safety net in case you lose your job or have a large unexpected expense. Most financial experts say a single person should have three months worth of expenses, and a married couple should have six months worth of expenses.
Pay down your debt.
In addition to building up an emergency fund, you should concentrate on paying down your debt. Some 20-somethings get trapped in a debt snowball – between student loans, credit cards, car payments, and the like. Instead of increasing the amount that you owe to others, work on paying off all of your obligations while you are still young.
Increase your earning potential.
In addition to decreasing your spending and increasing your savings, you should do what you can to increase the amount that you can potentially earn in the future. Take classes, earn certifications, get involved in extracurricular activities, and go to networking events.
Your budget should be analyzed and changed.
As your spending habits change, so too should your budget. This means that you need to reevaluate your budget often – more than just when you get a raise or a new job. Make a date with your piggy bank every month or two and review your recent spending, adjusting your budget as needed. This is also a good chance to notice if you have been overspending on any of your categories (food or entertainment, for example) and adjust your spending accordingly.
If you need additional assistance with your money, all you have to do is call Vargas and Vargas Insurance Agency at 617-298-0655. We offer financial planning services that can set you on the right track, or get you back on the path to financial success.