Here are some common financial planning concerns for people in their 20s and how to adress them:
Get rid of debt - If you are in your 20s and newly emerged from college, chances are that you are starting off in debt thanks to student loans, credit cards, and perhaps vehicle loans.
Of these types of debt, credit card debt is the one you want to go away as quickly as possible. Pay as much as possible, prioritizing cards with higher interest rates. Student loans are often have much lower interest rates than credit cards, and you can worry about them after the cards have been eliminated. And remember, don't just pay minimums; minimum payments barely cover the interest on your cards.
Plan for retirement - While retirement is still a good four decades away for folks in their 20s, it is never too early to start thinking about your financial planes. As soon as you begin your career, you should begin your retirement planning.
Ideally, your first job out of college will included a company sponsored 401 (k) plan that deducts a percentage from your check to put into a long-term investment account (usually between 1% and 5%). Opt to deduct the highest amount possible from the very beginning - if you never see the money, you will never miss it, and meanwhile, your money is growing for you.
If your employer doesn't offer retirement plan, set up an IRA account at your local bank, contributing the maximum you can every year. If you change jobs, do not cash out your 401 (k) While cashing out may seem appealing, you will incur taxes and penalties. Instead, opt to rollover into your new employer's 401 (k) or a special IRA account.
Build your savings - Once your debt is paid off, it is time to build your rainy day fund. Estimate how much money you will need to cover three to six months of rent, bills, food, transportation, etc. Put this money away in an account that you cannot easily access. Only use the money in case of a true emergency such as job loss, and repay it as soon as possible.
Being young and being fiscally responsible is a good combination. By laying the groundwork for financial success now, you'll be more prepared for the ups and downs of life as you change careers, build families, and eventually approach those golden years.
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