Do you often make impulse purchases? Have you ever used a credit card thinking you’ll pay if off later? If so, you’re not alone. Now is a great time to stop and consider how you’re handling your money matters, how those decisions will impact your future and what changes you should make now to make sure you don’t end up moving back in with your parents after graduation.
Recently, Stowers Innovations, Inc. conducted an Internet survey of people interested in learning more about financial matters. The survey showed many of today’s young adults are not preparing for their financial futures.
In fact, according to the survey, less than 10 percent of 18-34 year-olds surveyed have a specific plan for retirement at a specific age. You can take steps now to make sure you’re among this 10 percent.
Although retirement may seem a long way off now, the truth is, the sooner you start saving, the sooner you’ll be able to accomplish your financial goals. Likewise, the earlier you begin to invest, the greater the likelihood you have of accumulating wealth. It takes significantly less money to accomplish what you want when you have time on your side.
Retirement is not the only thing you should take time to consider. The survey found short term savings are also an issue of concern, with 48 percent of young adults admitting they do not have an emergency fund to cover three-months of living expenses should they face financial crisis.
Remember, the only person you can count on for financially is you. So, take control of your finances now and begin planning and thinking long term. The following six tips will help you analyze your current financial situation, pay off debt, save for the future and stay out of your parents’ basement.
Don’t procrastinate when it comes to saving for retirement; begin now. When you enter the workforce, take advantage of your company sponsored retirement programs such as a 401K or Simple IRA. Another option to try is a Roth IRA. This individual retirement account will allow you to begin saving tax-free, and tax-free withdrawals may be made after age 59 and a half.
Get rid of debt.
Analyze your current debt situation and create a plan that pays off debt quickly. Don’t get into the habit of buying now and paying later. The survey found more than 47 percent of adults 18-34 had over $8,000 in debt, not including a home mortgage. And 57 percent did not know how long it would take to pay off these debts. By paying off debt now, you will have more money to save for the future.
Make a plan and stick to it.
After analyzing your current financial situation, determine a financial plan that suits you. Once your plan is set, stick to it. Remember, consistency is key. Be sure your plan includes measures to eliminate debt and save for the long- and short-term.
Say no to credit cards.
Though credit cards can be a useful financial tool when used properly, the key is to pay them off every month to avoid interest payments. Say no to credit card spending when you don’t have the money to zero-out the balance each month.
Talk with your parents.
Ask your parents about finances and find out what has worked for them and what hasn’t. Learning from their mistakes can help prevent you from making your own, and learning from their successes can help point you in the right direction financially.
Educate yourself on financial planning. There are many great resources available, including magazines, books, financial planners and local banks. Surround yourself with as much knowledge as possible so you can make an educated financial plan that will carry you well into the future.
About the Author
Sam Goller is the executive director of Achieve Financial Independence WeekTM and author of Yes, You Can… Achieve Financial Harmony and Yes, You Can… Afford to Raise a Family. Achieve Financial Independence Week, Oct. 15-21, 2006, helps raise Americans’ awareness of their own spending and saving habits, and provides people of all ages with the strategies and information they need to achieve financial independence. More information is available at www.afiweek.com.