Financial planning is something that everyone should get into the habit of doing. Some often times misdirect their intentions and do not have the savings they want. This happens to those in their 20’s. This happens to those in their 40’s.
Is this happening to you right now?
Maybe you had savings in your 20’s. Something came along and took it away. Now you are looking to start over again. This happens to many of us. The only problem is you do not know how to begin.
We have 6 tips to help you.
(Special thanks to Marcus Roberts from Mirador Wealth for contributing to the points below).
1) Try to start up an emergency fund. This may be difficult for those who do not make enough. Try to put a little bit aside each month. $25 a month works fine. Saving $25 a month will go a long way. The more you keep telling yourself you will do this, the more likely it will happen.
2) Reducing your debt needs to be your next step in this equation. Get rid of credit card hassles. Pay down your mortgage. Put the money back into your pocket for a change.
3) Take a look at your employee benefits and max them out. Take the total pretax amount you can put aside and do it. Your employer has to match it 100%. This match is required by law. This will double your money in no time. It pays to be more aggressive with your money at 42 than at 62. What about the investments you do not make money on? It is not going to matter. You will still earn double the amount with your employer’s matched contributions.
4) Try to start up with an IRA or a Roth IRA. This may be possible for some of you and it may not be. Those who are able to do this should. I used to have a Roth IRA. I can tell you that a Roth IRA has an advantage over the others. The Roth allows you to avoid paying hefty taxes down the road. You will have to pay more upfront, due to the pretax thing. It will save you in the long run.
Say you are making about $80,000 a year or more. When you retire, you will need about $2 million in assets to live off of. This is a lower ballpark number, according to many statistics. You can not count on your social security. It may not be there by the time retirement comes around.
5) Do you have kids? You should start a college fund. What if my kid is not going to college? The money can be used for something else. The sooner you can start saving for college, the better off your family will be.
6) Most people in their 40’s have some type of family started. It is not just about you anymore, like it was in your 20’s. You need to have some kind of insurance. Start building up this insurance nest egg. This is especially valuable for those of you with over $1 million in assets.