Usually when we financial planners speak of financial independence, we’re referring to “retirement.” However, I strongly believe that the range of financial decisions that come with attaining adulthood (often accompanied by graduation around the same time) are just as critical – if not more so – than planning for retirement. After all, the foundational choices we make with money earlier in our lives have a lasting impact. For better or for worse.
If you are at the threshold of adulthood, here are five things to do now to start good financial habits that will pay off in all the years to come! (And, impress your parents too!)
- Create A Budget. Understanding your cash flow is ground zero of all the financial plans you will ever make. Budgeting doesn’t have to be overly complicated. Try the 50/20/30 budget. Also, Check out our top three choices for technology tools here.
- Be Aware of Financial Scams. Thieves don’t just target the elderly. Here are 10 things to watch out for! (Source: consumer.ftc.gov)
- Pay Yourself First. When you start collecting a paycheck, start automating some savings IMMEDIATELY. The initial amount is less important than establishing the habit.
- Participate in your employer’s retirement plan if they offer one. Be sure to contribute SOMETHING from day one, and try to contribute enough to get the full employer match if possible (the FREE money!). If you don’t have an employer sponsored savings plan, you can still build some tax-deferred savings, which are advantageous for long-term growth. A good option is a Roth IRA.
- Set Shorter-Term Goals. Notice I didn’t say short, medium, and long-term goals. Set goals that you will see the results of in a reasonable amount of time: 6 months, 1 year, 3 years. Once you have the satisfaction of achieving some short-term milestones, then begin to stretch to intermediate and long-term stuff.
- Create your cash reserves.
- Build some savings for your next (or first) vehicle.
- Have at least one fun goal!!
Congratulations on your new financial independence!
If you would like more tools and a personalized financial plan we offer a Foundation Plan designed just for folks in the “adulting” stage of life. Contact us to learn more.