10 things everyone should do to stay financially healthy

Financial Advisors


Youth financial plan

Youth financial plan

It can be difficult to get your financial foundation in order when you’re young, especially if you have student loan payments or feel broke with a new mortgage. However, it’s never too early to start financial planning. Setting a budget, improving your financial literacy, and understanding investments can set you up for success in your twenties. Here’s what you should know:

Regardless of your age, consider working with a financial advisor for more information on financial planning.

Tip 1: Be financially literate

Financial literacy means understanding how to use money to make profitable decisions. In other words, understanding the basics provides a solid foundation for your financial habits and goals.

For example, if you want to get out of debt, understanding how best to do it is essential. Specifically, you need a working knowledge of interest rates, budgeting, and how to compare debt and investment growth. This way, you’ll know whether it’s worth diverting money from your monthly debt costs, the extra money you need to deal with your debt, and your investment contributions.

Tip 2: Minimize Debt

In that regard, managing your debt is essential to your finances. It’s best to have a debt repayment plan rather than eating up cash on interest payments. There are two common methods of debt repayment: snowball or avalanche.

A snowball strategy means paying off the smallest debt first. Once you have paid off your smallest debt balance, you can apply this payment to your next smallest debt. This way you gain momentum with each payment. The avalanche approach, on the other hand, means attacking the debt with the highest interest rates, and the logic is that interest rates make debt more expensive over time. This way, you can get rid of your most expensive debts first and increase the amount you apply to the principal of your debts.

Remember that liabilities are the opposite of investments. Investments grow based on rate of return and liabilities grow with interest. Therefore, it is important to manage your debt before you start investing large amounts.

If you are ready to be matched with a local advisor to help you reach your financial goals, get started now.

Tip 3: Start saving and investing

Youth financial plan

Youth financial plan

You may be wondering what the point of saving money in a hurry. After all, he has 30 or 40 years until retirement. But that’s why it’s best to start donating to your investment account now. You can double your earnings and grow your savings exponentially over decades.

For example, let’s say you start investing $150 per paycheck when you’re 25. The average annual return on investment is 8%. After 40 years, the account will have approximately $1.1 million. On the other hand, starting at age 35, if he invests for 30 years, he will have about $490,000 in his account. As a result, it costs (literally!) more money to invest now than to invest later. You can use SmartAsset’s free calculator to estimate the return on your investment.

If investing sounds intimidating, it’s easy to get started. If your employer provides her a 401(k), contributing to it is an excellent option. You can also receive matching contributions from your employer. On the other hand, if you don’t have access to a 401(k), an individual retirement account (IRA) is an easy place to start. You can open an account and fill your portfolio with passively managed investments such as index funds and exchange-traded funds.

Tip 4: Learn how to budget

A budget is one of the most useful tools for strengthening your finances. It may sound scary, but knowing where your money is going throughout the month is one of the most powerful aspects of financial literacy. For example, reviewing your spending may reveal unused streaming subscriptions, weekly restaurant trips, and outdated gym memberships. Addressing these expenses can quickly give you a $100 a month budget, allowing you to save and invest more.

Dozens of budgeting apps and tools make this financial habit easier than ever. You can start with a mobile banking app that offers free budgeting tools. However, you can also take advantage of our online budget calculator.

Tip 5: Track your spending habits

A budget is the foundation for tracking your spending. Additionally, having the habit of spending less than you do can help reveal abnormally high spending. As such, it’s a good idea to do a quick review of your finances every 2-3 months. Specifically, you can check your bank and credit card statements to see if you can cut back on future spending.

Tip 6: Start an Emergency Fund

Sudden spending can derail the best spending plans. For example, your budget may take months before you need to fix a $700 car. Then, all of a sudden, your investment contribution can go out the window, making it harder to get back on track once the emergency is over.

To handle this situation, start an emergency fund alongside your investment fund. You can build up over time in your savings account. As a rule of thumb, he recommends having 3-6 months worth of expenses in reserve as an emergency fund. In this way, a broken furnace or an unexpected medical bill becomes a minor bump on the road rather than a crisis.

Tip 7: Protect your property

The traditional image of success includes a well-paid home, a generous retirement, and a high salary, but this scenario lacks a key ingredient: protection. Protecting your assets generally means taking out insurance or protecting your assets from taxes (more on this later). For example, an uninsured home can become a huge liability rather than an asset if it is damaged by a fire. Instead, homeowners insurance can cover these disasters and protect your property.

Tip 8: Take care of your health

Youth financial plan

Youth financial plan

Healthcare is one of the fastest growing costs in the US. As a result, keeping this cost low improves your financial health. Staying healthy is the best way to keep medical costs down. For example, a consistent diet, exercise routine, and annual check-ups can improve your health. Practicing these practices can improve quality of life and reduce time spent in the hospital.

Tip 9: Understand your taxes

Amidst your financial successes and hardships, one constant remains in the background: taxes. Uncle Sam will be paying her entire career and retirement, so it’s best to know better to minimize your tax burden. Specifically, your salary and other forms of income place you in a tax bracket that indicates what percentage of federal taxes you pay.

Additionally, retirement accounts have their own tax implications. For example, a traditional 401(k) uses pre-tax dollars, which reduces your tax burden while at work. However, if you withdraw money from your account when you retire, you will be subject to income tax. A Roth IRA, on the other hand, uses funds already taxed by the government, so when you retire, you will not pay taxes on the income from this account. So, planning your taxes while you are young can help you optimize your finances.

Tip 10: Partner with a financial planner

Managing your finances is a serious undertaking. Luckily, a financial expert can help you create a financial plan tailored to your unique circumstances. Moreover, their knowledge and expertise can fill in any gaps in your understanding.

It’s best to understand how financial planners make a living and then commit to it. Financial advisors can be requested in multiple ways. For example, some advisors charge by the hour, while others charge a percentage of the assets they manage. Therefore, we encourage you to find a rate advisor that fits your situation. Additionally, by working with fiduciaries, advisors put your interests first, rather than signing up for investments with high fees and administrative costs.

Conclusion

Creating a financial plan takes effort, but it’s worth it. Your financial habits will dictate your current and post-retirement lifestyle, so it’s best to manage your finances. Luckily, you don’t have to go it alone. Hire a financial expert to set your goals and keep you on the right track.

Financial Planning Tips for Young Adults

  • Financial wellness can seem like juggling. After all, budgets, retirement planning, debt management, insurance, and more need to be prioritized. Fortunately, a financial advisor can clarify each aspect of your situation and create a sound financial plan. It’s not hard to find. SmartAsset’s free tool matches you with up to 3 vetted financial advisors serving your area and allows you to interview advisor matches for free to determine which advisor is right for you. increase. If you’re ready to find an advisor who can help you reach your financial goals, get started now.

  • Investment strategies change with age. It’s generally best to be aggressive when young and risk averse as you get older. For more information, here’s how to manage portfolio allocations regardless of age.

Photo credit: ©iStock.com/RyanJLane, ©iStock.com/fizkes, ©iStock.com/andresr

10 financial planning tips for young adults first appeared on the SmartAsset blog.



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