Lists & Tip Sheets
Financial Resolutions: The 20-somethings
As a 20-something, you are part of a very diverse group when it comes to lifestyle and finances. You may be a student, new to a full time job, a new renter or homeowner, married or single, a parent or even a small business owner. But no matter what you’re experiencing, you are likely relatively new to managing your own money. While no financial advice applies to every circumstance, there are several common strategies that people in their 20s may want to consider. Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial, offers the following tips to help you establish financial security now and for the future.1. Develop good money habits. The financial decisions you make now can have a significant impact on your future financial stability. Getting organized and to paying attention to how you spend your money is a great place to start. Establish a budget by determining how much money you’ll need to meet your fixed expenses, setting an amount to deposit into a savings program for short and long term needs, and designating the rest for discretionary costs. If you’re earning a regular paycheck, consider setting up an auto-transfer option to make saving easy and begin to contribute to your employer-sponsored retirement plan. Also review your spending habits regularly. You may be surprised by how much you’re spending on nights out or a daily coffee.
2. Hit the books. Make timein your schedule to do some research on investment options, and begin to educate yourself about the economy and investing. Knowing what is happening economically and politically can help you make well-informed financial decisions. Also be sure to read the fine print when you’re signing documents for a loan or big purchase like a car or a home. Don’t hesitate to consult those who’ve done it all before. Seek advice from your parents, older siblings, friends – or better yet, a financial advisor who can provide more objective advice.
3. Pay down debt. If you’ve used loans to pay for significant expenses – such as school, a vehicle or a home – be sure you know what you owe and set up a system to pay down your debt. Consider creating a document on your computer where you can track your debt, record your payments and easily track your progress. Not only is it inspiring to see the “owe” column getting smaller, this will also help you protect your credit and ensure you won’t forget anything. Before you make any additional purchases on credit, make sure the payments will be manageable. Also avoid using multiple credit cards or charging regular expenses, like utility bills or groceries, unless you pay them off immediately.
4. Protect yourself. Whether you own a home or are renting, make sure you have the proper insurance policies in place. Health insurance is also a must, even if you are currently healthy. If you are unemployed and are not eligible to be insured under your parents’ or a spouse’s policy, a health savings account (HSA) – which carries low premiums but still provides catastrophic coverage – could be a option. And if you’re cohabitating with a significant other or planning to get married, have a candid conversation about finances. Your partner’s debt will become your own, so it’s crucial to be aware of the financial implications they may be bringing to a long-term commitment.
5. Plan for milestones – and emergencies. When it comes to prioritizing your savings, think in terms of life cycle and major milestones. Set specific financial goals for each significant event – marriage, having children, buying a home and retirement. Also keep in mind that the more possessions you acquire and the larger your family grows, the more financial responsibility you assume. In addition to saving for your goals, establish a crisis fund that could cover three to six months of expenses if you face a financial emergency.
Your twenties can be one of the most eventful decades of your life, and a period full of firsts. You’re likely still finding your way and establishing yourself – so don’t forget to set financial goals along with personal and professional ones, and recognize when you need help. Even if you haven’t accumulated much to invest, a professional financial advisor can evaluate your current finances and help you ensure your plans for the future are on the way to becoming realities.
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