Being financially secure enough to enjoy your life in retirement is the last thing on the minds of those under 30. After all, with the stress of all the expensive “firsts” that often come about during this period, like purchasing a car, buying a house and starting a family, it’s hard to even think about saving for the future. However, working toward financial security need not be an exercise in self-deprivation, as many people assume. Attaining this goal even has some immediate benefits, as financial insecurity can become a serious source of stress.
Just like any goal, getting your finances stable and becoming financially successful requires the development of good financial habits. In general, our quest to eliminate debt, increase our savings and increase financial security for our family. we had to make saving money a priority.
Enjoy yourself while you’re young – you will have plenty of time to be miserable when you’re older. Living a successful, happy life is about finding a balance between time with family and friends – and between work and leisure. Striking a proper balance between your life today and your future is also important. Financially, we can’t live as if today was our last day. We have to decide between what we spend today versus what we spend in the future. Finding the correct balance is an important first step toward achieving financial security.
Recognize your most important financial asset: Yourself
Your skills, knowledge and experience are the biggest assets you have. The value of your future earnings will dwarf any savings or investments you might have for most of your career. Your job and future career are the most important factors in achieving financial independence and security. For the entry level or those just entering the work force, future career opportunities are as bright as they’ve ever been.
Look at yourself as a financial asset. Investing in yourself will pay off in the future. Increase your value through hard work, continual upgrading of skills and knowledge and by making smart career choices. Efforts to improve your career can have a far bigger impact on your financial security than tightening your belt and trying to save more.
Become a planner, not a saver
Research has shown that those who plan for the future end up with more wealth than those who do not. Successful people are goal oriented: they set goals and develop a plan to achieve them. For example, if you set a goal to pay off your student loans in two years, you’ll have a better chance of achieving this goal than you would if you merely said you wanted to pay off your student loans, but failed to set a timetable.
Set a short-term/long-term plan
Life holds many uncertainties – and a lot can change between now and 30 years from now. As such, the prospect of planning far into the future is a daunting task for young investors.
Even the process of writing down some goals will help you to achieve them. Being goal-oriented and following a plan means taking control of your life. It is an important step toward improving your financial independence and security.
Make Sure Your Lifestyle Costs Lag Your Income Growth
Many new graduates find that in the first couple years of working they have excess cash flow. Still used to their more frugal student spending habits, it is easy to make more money than needed. Rather than using excess income to buy new toys and live a more luxurious lifestyle, put the money toward reducing debt or adding to savings. As you advance in your career and attain greater responsibility, your salary should increase. If the cost of your lifestyle lags your income growth, you will always have excess cash flow that can be put toward financial goals.
Be financially literate
Making money is one thing; saving it and making it grow is another. Financial management and investing are lifelong endeavors. “Making sound financial and investment decisions is important for achieving your financial goals,” says expert financial adviser, Francisco Colayco,
Research has shown that people who are financially literate end up with more wealth than those who are not. Taking the time and effort to become knowledgeable in the areas of personal finance and investing will pay off throughout your life.
Seize opportunities but make calculated risks
Taking calculated risks when you are young can be a prudent decision in the long run. You might make mistakes along the way, but remember, mistakes are the lessons of wisdom. You often learn more from your mistakes than from your successes. Also, when you are young, you can recover faster from financial mistakes, and you have many years to recover.
Borrow money for investments and never to finance a lifestyle
We’ve always been taught to live within (or for some it’s usually below) their means in order to attain financial freedom and stability. Using credit for a life you feel entitled to is a losing proposition when it comes to building wealth. The constant borrowing will assure that there is no money available for investing, and the added interest expense of borrowing further increases the cost of the lifestyle.
Borrowed money should be used only for investing – where your gain will outrun your borrowing costs. This might mean investing in the literal sense (stocks, bonds, etc.) or it might mean investing in yourself for your education or to start a business or to buy a house. In these cases, borrowing can provide the leverage you need to reach your financial goals faster.
Lastly, read about personal finances. The more you educate yourself, the better your finances will be. Good luck!