For millennials, the transition from college into the “real world” can be eye-opening, refreshing, scary and even overwhelming.
The unemployment rate is the lowest since November of 2007 and more people are pursuing the “American Dream.”
Increasingly I hear millennials say they should start, but have other things to worry about first.
It’s my generation, the millennials, yes you and I, entering the workforce and no longer left eating ramen noodles in our dorm rooms.
We’re highly motivated, independent, tech savvy, social architects taking the world by storm, but we can’t seem to figure out retirement?
We can change that too. And we’re going to start right here, right now with five better places than a mall shopping spree to stash your excess funds.
Call it your emergency fund, uncertainty fund, freedom fund or rainy day fund, we can agree, it’s necessary, and you need to make sure that you fund that fund.
No fund intended. Kidding.
It should be one of the first financial objectives on your list. The general rule of thumb is to have 3-6 months worth of expenses in an emergency fund.
A key factor of having an adequate emergency fund is to be able to meet unexpected costs, such as an air conditioning unit going out or replacing the brakes on your car.
It’s also a lot better to be able to pay for those big ticket items in cash now than using a credit card. The standard high-interest rate credit cards can ruin your financial well-being. You already have one burden, no need to multiply your misfortune.
Arguably the greatest financial mind to ever live, Warren Buffett once said: “The best asset is your own self.” Utilizing the resources that advance your career such as attending workshops or conferences and acquiring additional certifications in your field can add credibility, knowledge and progress your professional skills.
There is also a tax break for this too! The Lifetime Learning Credit, applies to qualified education expenses such as grad school and continuing education. The credit can reduce your taxes up to $2,000 annually. You can apply the lifetime learning credit each year you incur qualifying educational expenses. If you keep learning, it keeps paying — or crediting; you get the point.
A ready-made plan to start your retirement planning success early. Many people, especially straight out of college, use the excuse of affordability and don’t contribute to their 401(k) or other retirement plans.
I get it. You have a lot on your plate. You have financial goals, bills and financial burdens vying for your money.
Remember, you can make mistakes, but there are no do-overs in retirement.
I would argue, you can’t afford not to save. If there’s a will, there’s a way. It may not be the most exciting thing to spend your money on in your 20’s, but you’ll feel pretty glamorous when you can retire. You may not realize that you’re trading your fancy lattes today for a beach house in retirement.
A 401(k) is an employer sponsored retirement plan with the opportunity to deduct a portion of your paycheck pre-tax and grow tax-deferred until you retire.
In my opinion, the most attractive part about 401(k)’s is the employer match. If you decide not to contribute to a 401(k), you will be leaving what I like to call “free money” on the table.
It’s important to plan so you don’t save more than you can handle too. A penalty of 10% is added to your withdrawals if you take money out of your 401(k) plan early.
Debt free may seem like a no-brainer, but many people put this on the back burner of their financial life. Whether it’s student loans, a mortgage or credit card debt, the interest rates attached are anchors leading to paying way more.
If you want to pay off your debts the fastest, consider paying the highest interest debts off first. You can do this by adding extra money to these debts and paying the minimums on the remaining debts. While this may not work for everyone, it may be the fastest.
Adjustable rates can take this strategy by surprise, so be sure to check all the terms of the debt you hold.
Personal Retirement Fund
The future of Social Security may be up in the air. It’s so far off that you may want to consider it a bonus if you get it at all. With that said, there is a huge need to save additional dollars for retirement. There are plenty of options to consider beyond the plans at work. A Roth IRA, Traditional IRA or a non-qualified account can be used to fund your future goals.
Keep in mind, “a goal without a plan is just a dream.”