Navigating Your Finances: A Blueprint for Young Adult Financial Success
How often have you heard someone say:” I wish I knew then, what I know now…” Well, for those parents and grandparents with young adults in their lives, this is a video you are going to want to share with them!
I’m Darren Leader of Simmons Capital Group. Today I’ll offer some top tips for those young adults just starting out on their financial journey.
Investing as a young adult is an important financial step that can set the foundation for your future financial security, yet it can be difficult to know how to start. Learning effective money management as early as possible can help you achieve freedom and long-term financial goals. The sooner you start planning for your financial future, the better off you’ll be in the long run.
Here are our top tips for young adults looking to start investing:
Define your financial goals and be clear and specific. Whether it’s saving for a home, retirement, travel or other objectives, your goals will influence your investment strategy. Knowing where you want to go is essential to mapping out the best path to get there.
Before diving into investments, ensure that you have an emergency fund. This fund should cover three to six months’ worth of living expenses and will serve as a financial safety net for life’s unexpected events.
If you have large debts like student loans or credit cards, it often works best to focus on developing a debt payoff strategy to pay these off before starting to aggressively invest.
Once you have the first 3 tips in place and you are ready to start investing, start early. The power of compounding works in your favor when you start investing early. Even small amounts can grow significantly over time. For examples of this, watch past coffee & cash videos that explain how compounding works in your favor the sooner you start.
If your employer offers a retirement savings plan, such as a 401k, take advantage of it. Employer savings plans provide tax advantages and can play a crucial role in building wealth over time. If you can, contribute enough to get any matching contributions if they are offered. Understand the details of each savings plan, including contribution limits, investment options, and withdrawal rules.
For new investors, a low-cost index fund or exchange-traded fund can be a great starting point as they provide broad market exposure at a low cost. You also want to make sure that you have thought through how much risk you can handle emotionally. Investments carry risks, and it's essential to align your investment choices with your comfort level for risk.
Markets can be volatile in the short term, but long-term investors can ride out these fluctuations. Investing is a long-term game. Over the years, the impact of short-term market movements tends to be less significant. Avoid making decisions based on short-term market fluctuations and stick to your investment strategy. Trying to time the market by buying and selling based on short-term predictions is challenging and often leads to poor results. Focus on a disciplined, long-term approach.
Setting up automatic contributions to your investments, even small ones, can make a significant impact over time. These contributions ensure a consistent and disciplined approach to saving and investing. We generally suggest making contributions to your retirement savings based on a percentage of your income, versus a fixed dollar amount. This way, as you get a raise, you automatically increase your retirement contributions.
Finding a good financial planner can be a valuable step in your investment journey. A fiduciary financial planner can provide personalized advice, help you define and work towards your financial goals, and navigate complex financial decisions.
If you have questions about your current financial planning, please schedule a time for a conversation by calling 518.406.5624 or by visiting our website at simmonscapitalgroup.com.
Please like and share our videos with friends and family. We’ll see you next week for another Coffee and Cash.