In today's day and age, finding sound financial advice can be a real challenge – especially financial planning for young people. Who should you listen to when so many different people and places tell you all sorts of things?
The experts at Pathway Financial are breaking down the top planning tips for young people that can be combined into several other strategies and financial plans. Whatever your goals and next steps, implement these 6 tips as the foundation of your financial roadmap.
The most important financial planning tips for young people
For many young adults, there is a significant knowledge gap in how to approach finances and financial plans. Without foundation courses or classes to teach the basics and set these young people up for success, a lot can fall to the wayside, making it harder to get on track by the time their late 20s or early 30s roll around.
Many people understand that they should save money but don't always know how to. There are two types of people when it comes to finances: non-planners and planners.
Non-planners often save money when they can, putting small amounts towards things they're looking to in the future and hoping that everything will work out in the long run. On the other hand, planners usually know what they're saving for, how much they need to save, and how long it will take them to reach their goals. So, where should you start?
1. Pay Yourself First & Set Emergency Fund Away
"Pay yourself first" is one of the most-repeated mantras in personal finance, and for a good reason. This simply means that as you make money, you should also save money for emergencies and your future. This is a simple practice that not only keeps you on the right track financially but it can also ease your mind. Even on the tightest budget, there are ways to put some of your money into an emergency fund every month.
2. Track Your Spending
When was the last time you took a look at how you spend your money every month? If it's been a while, please take a moment and do so.
By reviewing your monthly spending, you can see exactly how much impact your daily habits make on your wallet. With a bird's-eye view of where your monthly income is going, you can make the necessary changes to have more control over your spending habits and align them with your goals. With the help of many apps and budgeting tools, you can easily track how much you're spending and stop wasting money, allowing you to manage your finances better.
3. Protect Your Wealth
You don't work hard to throw your wealth away. Instead, you want to protect the wealth you've worked hard to earn and help it grow over time. Here are some simple ways to protect your wealth and ensure your money stays where you want it.
- Remember that inflation can eat away at your money if you're not careful. Look for a high-interest savings account that will allow you to earn more money over time with little financial risk.
- Insurance is another way to protect your wealth. If you're a renter living in an apartment, purchase renters insurance to protect your belongings in the event of a fire or burglary.
- You can also look into disability income insurance, which protects your ability to earn income. In the event you fall ill or become injured, you will have a steady stream of income to keep you afloat for an extended period of time while you recover.</
4. Manage Your Existing Debt
Finances aren't just about the money you make but also about the money you owe. Understanding how to handle debt properly is an essential financial skill, and the sooner you learn, the better. You can help your child understand how to handle money and debts by lending them small amounts to manage.
This approach can teach children about lending, interest, minimum payments, and more. At some point, they will be responsible for their own finances, so helping them understand the basics now will pay off down the line.
5. Save For Retirement… Now
Retirement planning is something everyone can benefit from. The earlier you start the planning process and get a plan in place, the sooner your money can start working for your future and work for when you're ready to retire.
A retirement plan is unique to everyone based on several factors, such as:
- How much money you will need in retirement
- How much risk are you willing to take
- Tax-advantage preferences
Setting up a plan today – no matter how young you are – will pay off dividends in the long run and improve your quality of life down the road.
6. Open a 529 College Savings Plan
529 College Savings Plans are one of the best ways to help young people prepare for education ahead, even if they're just children now. Pathway Financial Group's college financial advisors can help you map out a college savings plan.
Even if you are still determining if your child will attend college, you can change the beneficiary on the account to another child or immediate family member, including yourself. As long as the funds are used for education expenses, the money can be withdrawn tax-free.
Looking for more tips?
Our team is here to help. Whether you have questions about finances or are ready to develop your own financial planning roadmap to help you reach your goals, reach out to our team and learn more about how we can help.