Saving and investing for retirement may be the last thing on our minds right now, but it’s imperative that we start thinking about long term plans like this. Many of us are still pursuing higher education, climbing the corporate ladder, or starting our own businesses. Right now, it may seem that our income is strictly for survival and maybe a trip or two to the mall or Cancun. How ever you spend your money is justified because well, it’s yours! But in the grand scheme of things, it wouldn’t hurt to begin saving for a rainy day or learning more about investing now so that what you make today could build interest and double or even triple forty years from now. Check out these 5 steps to saving and investing that we’ve gathered.
1. Begin with Good Habits
Our generation can be so misunderstood. Society thinks all we want to do is build empires with no effort, escape corporate conundrum to find ourselves, and be “Insta-famous” while doing it all. While some of this may be true, many of us are interested in the big picture too―planning for our future. In terms of budget and finance, there are habits that we can develop now that will help us become better money managers. Such habits include, acquiring assets (CDs, stocks, bonds), setting a spending plan for every pay period, and paying down any outstanding debt like credit card bills or student loan payments. It may seem like an intimidating venture, but experts like USA Today broke it down best.
Let’s face it, life happens and at any moment our routine of doing things can be changed due to tragedy or mishap. Your car breaks down, you drop your new iPhone 6S in the pool, you’re in-between jobs―a plethora of things can happen at any moment, but you should be prepared. We gleaned this information from Bankrate.com, that an emergency fund is a must for situations like these. Investment counselor, Kent Grealish of San Bruno, California even suggests saving up to $1000 for your emergency fund. Before you close out of the post, consider building up to this amount little by little with putting away $25 every month. In no time, you’ll be ready to finance your way through a small emergency.
3. Automatic Transfers
If you have a checking and savings account with the same provider, this may be the easiest way to start saving. Larger corporations like Bank of America (Keep the Change), Chase, and Wells Fargo (Way2Save) offer instant savings programs that transfer cents on the dollar from your checking to your savings account whenever you make a debit or check card purchase. It may not seem like a lot now, but a continous stream of your Target runs and mani/pedi appointments, coupled with your automatic payments for bills each month, will certainly begin to pile the coins up. Before you know it, you’ll have amassed whole dollar amounts that over 12 months can reflect a respectable savings amount.
4. Individual Retirement Account (IRA)
Don’t let the name frighten you. Beginning to save for retirement as a twentysomething is a power move that we should all take advantage of exploring. An IRA is simply an account that you set up with the intention to consistently make contributions to for retirement. There are now two types of IRAs and you will know which one is better suited for you based on your yearly income and how much you are expected to contribute based on that income. There is also the option of 401(k) for those of us who have found our dream job and plan to be there long-term. This type of arrangement is employee-sponsored and automatically takes the money from your paycheck before taxes. In some cases, your employer may match a percentage of your contribution, that’s free money! Research is the most important thing when trying to determine when and how you can start saving for retirement. Check out Fee Hacks for more information on the pros and cons of each option.
The older generations think they have us all figured out and they may be right when it comes to assessing our talents. There are countless studies circulating to figure out how to “harness” our potential in the workplace and “direct” our energies toward solving age-old societal issues. There is no denying that we are a bright group of people and we can literally change the world. Yet, while they try to figure us out and we continue to allude them, they may be on to something. We are all at different levels of income margins and markers of success, but we could all benefit from having a side hustle. Earning extra income through the things you’d do for free (like graphic design, teaching a dance class, or freelance writing), can earn you serious bucks to either add to your savings repertoire or to splurge a little.
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