When it comes to planning and saving for retirement, you must be consistent and save and invest every year. You also must be disciplined. Once you invest the money, you cannot touch it. Because of the power of compounding investment returns, contributing to your retirement every year and allowing it to grow are the keys to building your nest egg. It is easier to put money away when you are young than when you have a mortgage or a family. Many of those that are just starting out in the workforce, however, face substantial headwinds: hefty student loan payments and high—and in some cases sky-high—housing costs. Even with a tight budget, saving for the future must be a priority. Start saving for retirement through your employer as soon as possible and take advantage of corporate matches. Corporate matches are free money that helps boost your savings every year. Make sure…
Evaluate Your Creditworthiness
Building good credit is essential. You can pay for large expenditures over time using student loans, mortgages, and car loans and leases, but how you handle these and other debts has a significant impact on your net worth. Also, how you manage these debts plus credit cards and cellular and utility bills has a profound effect on your credit score. Credit scores range from 300 to 850. In general, scores above 700 are good, and scores above 800 are excellent. Not only does your credit score determine your interest rate, but it also determines whether or not you will be able to get credit if you need to borrow. Keep in mind that each lender has different requirements for a minimum credit score that they will approve for potential borrowers. Depending on the lender and the type of loan you are requesting, being in the “Good” range may not be…
What is Your Time Horizon?
Life transitions, such as college graduation, are a good time to think about financial goals. Different goals have different time horizons. Some are short term—such as establishing an emergency fund—and some are long term, like retirement. Tackling all your savings goals at once is unrealistic, so you should prioritize. The most immediate savings goal is your emergency fund. Experts recommend that you have an emergency fund sufficient to cover six months living expenses. Assets in the emergency fund should be very liquid such as cash in a savings account or in a money market fund. If you are new to the workforce, it may take time to build up an adequate reserve. The easiest way is to transfer a portion of your paycheck every pay period directly into an account. You may need a bigger emergency fund in some circumstances. You may face hurdles when looking for a new job,…
Spend Less; Save More
Finding ways to save more starts with finding ways to spend less. Analyzing where your money goes every month is a great place to start. Take a close look at your non-essential expenses or “wants.” These are often tied to lifestyle choices. Reducing non-essential outlays will free up cash you can use to pay down debt, shore up emergency fund reserves, and save for retirement. Articulating a plan and exercising discipline increases the likelihood that you will attain your goals. Analyze Your Spending There are a vast number of personal finance websites and apps. Linking your transaction activity to one of the tools helps track your spending on a real-time basis – overall spending levels, spending by category, etc. There are also data security considerations. If you choose a website or app, select a leading one with excellent security. Whereas I am in favor of budgeting tools to analyze spending,…