Planning Your Financial Future: A Guide for 20-Somethings
Did you know that in 2019, only one in four Americans in their early twenties was considered financially secure? Though your twenties often bring job stability and increased income, it can still be difficult to manage your finances with factors like debt and the increased cost of living.
Would you like to learn about how to set yourself up for success while in your twenties? Here are some things you can do today to have a better outlook on your financial future.
Open a Roth IRA
Retirement may seem like a long way off, but there are ways to start saving now and have a large amount when you decide to stop working. There are different types of retirement accounts, but one of the most advantageous is the Roth IRA.
It is not difficult to learn how to open a Roth IRA. Find the financial institution that you want to open the account with, then fill out a few forms to sign up for your Roth IRA.
One of the biggest benefits of a Roth IRA is that it uses taxable income, but withdrawing your contributions is tax-free. If you are in a higher tax bracket when you retire, you will potentially save thousands of dollars.
Pay Down High-Interest Debt
Most people are in some type of debt, so if you have a plan to pay it off, you should not worry too much. Taking out a car loan will usually mean a low simple interest rate. Simple interest only adds a small amount to your total loan.
Debt that has compounding interest can take longer to pay off. For example, credit card debt can have high interest rates and accumulate quickly. You should try to pay off these types of debt more quickly to save yourself money in the long run.
Stick to a Budget
You should know how much income you bring in every month before you sit down to make a budget. Write down everything that you typically spend money on and allocate the appropriate amount.
It is sometimes a good idea to estimate on the high end so you do not have to worry about lack of funds when it comes time to pay your bills. Some of the things you should include in your budget every month are:
- rent or mortgage
- utility bills
- car payments and gas
- miscellaneous purchases
For even better money management, you can also include options like saving a certain percentage or dollar amount. That way, if there is an emergency you will have a buffer.
Secure Your Financial Future
Even when you are in your twenties, you should still be thinking about your financial future and your retirement years. With these tips, you can start to pay down debt and build a nest egg for financial success.
Want more information on how to start making moves to better your life? Check out our site for answers to all of your questions.