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Twenty Somethings Should Start to Save Now

3 November 2015 One Comment

canstockphoto9921679If you are just starting out on your career you have the chance to plan your financial future and your age is an extremely important factor in that planning. Even if you have a student loan to pay back you should have the scope to think about saving and taking control of your finances. You can work out for yourself what figure you will have by saving $50 or $100 a month for 10 years at different growth rates. If you are not very good at figures get someone to do it for you. You are certain to be pleasantly surprised, just as you may be dismayed about the problems of achieving a good fund if you start in your mid-50s; it’s too late even if you are prepared to continue to work until you are 70.

Just look at the facts. 1000 Americans polled by Wells Fargo stated their aim was to have a fund of $500,000 on retirement. They were all aged between 55 and 59 and on average currently had $150,000. Those over 60 were aiming for $300,000 and currently, with only $50,000 at present, are faced with similar problems. Their existing employers often did not want them to continue to work after the official retirement age while health is often an issue for people reaching that age. Circumstances one way or another mean they retire with 62 being the earliest age to draw Social Security; taking benefits at that age means the recipient misses out on extra years of guaranteed growth.
False Optimism
The bottom line is all are being too optimistic if they think they can save so much in a maximum of a decade and a half and sometimes in less than a decade. You do not need to ever be a really high earner to create a good retirement fund, you simply need to be saving from when you are young and just beginning to work.
No one is suggesting it is easy to satisfy every demand placed upon your monthly pay check but the effort will be worthwhile. You may have built up a little credit card debt because companies issue them to anyone 18 and above whom the feel are suitable. It is tempting to use a card to subsidise student life but it is an expensive way to do it because companies apply a high rate of interest on any outstanding balances. Once you are earing you should take out a personal loan and pay off such balances; online lenders who see you have a regular income and seem able to pay the instalments throughout the whole term of the loan are likely to approve a realistic application.
Small Start Is Fine, Just Start
Even though you may be repaying a student loan as well as these instalments, even saving $50 a month will kick off your retirement provisions. If you open a 401K you can get your employer to pay an equal amount each month. If $100 a month is being set aside when you are in your early 20s, even that amount will be considerable by the time you retire with even average growth.
There will always be other things to think about as you grow older. You may marry and raise a family while there is no doubt that real estate is always a good medium to long term investment; that means a mortgage. It makes it even more important that you get rid of expensive debt such as credit cards and ensure your credit score warrants the approval of the mortgage.
An Early Strategy
The secret is to plan at strategy early. You need a budget that reflects all your monthly financial activity and it must show a ‘profit.’ The budget needs constant monitoring and amending as circumstances change which they invariably will over time. Those people nearing retirement age are still likely to remember events when they were in their 20s so why shouldn’t 20 year olds be able to imagine reaching retirement? Those that can and realize that comfortable retirement does not come without planning and saving will reap the benefit in later years. You have been warned and if you think Social Security is guaranteed to do the job for you, think again.

One Comment »

  • smiller257 said:

    I agree, the earlier you get started, the better off you will be. Once you have a family, it's also important to have an estate plan. Here's an article that talks about what things are necessary for estate planning and what documents are critical:
    https://www.linkedin.com/pulse/how-plan-your-ulti

    All the best.