It’s hard to decide on your financial goals when you’re in your 20’s and 30’s. Let’s face it, these decisions are kind of hard at any age! But the older that you get, the more that you’ll wish that you’d learned this stuff. So, here’s a summary on what you need to do as well as an explanation!
Emergency Fund: If you are in your twenties you need to start an emergency fund. Begin by saving an emergency fund of at least $1,000. Once you reach your 30’s you should have more money since you have more responsibilities. If you have bills (and you probably do), you must prepare for the emergencies such as a job lose. Therefore, your goal is to have a minimum of three months of expenses. For example, if your expenses (rent, car payment, utilities, food) cost $1500, you need to have at least $4500. This may seem hard but remember the money is saved regularly and consistently over time and it accumulates.
Minimize Debt: If you minimize your debt if an emergency occurs you will have less worries. Overspending can kill a budget, break up a marriage, and cause sleepless nights. Before spending unnecessarily ask yourself “can I afford this?”. If you aren’t paying cash, you probably can’t afford it. You must live within your means!
Budget: You must have a budget, it tells your money where to go.
Homeownership: Buying a home isn’t for everyone. Homeownership requires stability which means that you can’t easily move. If you find your ideal job in another state the transition will be more difficult if you own a home. However, if you are sure that you’ll live in the home for at least 5 years, homeownership is the cornerstone of your financial wellness!
Retirement: You’re young, and you’re not thinking about retirement…yet. But, if you live long enough you’re going to need retirement funds! Therefore, if your employer has a 401k retirement fund, you must enroll. If not, you can open your own retirement account through Fidelity or various other administrators. Contribute 10% – 15% of your income toward your future.
College Fund: Encourage your kids to get good grades. It not only raises their self-esteem but it could help them get a scholarship to minimize college tuition. In the meantime, you should be saving for their college. A 529 college plan is a good choice.
Insurance: If you have children you must protect them in the event of your death. There’s no eloquent way to say it, if you die you need to be assured that your family is taken care of.