Planning for retirement should begin as early as you enter the real world and have your first job, and it should be a continuous process as you grow older. To make your preparation more organized, you can set retirement planning goals based on your age.
In the first part of this series, we will discuss retirement planning goals for young adults in their 20s. As early as this age, it is essential to lay the ground work in building a retirement nest-egg. If you’re a twenty-something who’s starting out in life, here’s a guide on how you can keep your finances on track and jumpstart your retirement nest-egg.
Develop Good Money Habits
At a young age, make it a point to develop good money management practices such as proper budgeting, paying yourself first, building an emergency fund, and having a separate account for long-term savings.
Understand and apply the art of delayed gratification, or saving for things that you want but can’t afford at the moment instead of swiping that credit card on impulse. Aside from preventing debt, this will teach you self-discipline and prompt you to appreciate and put more value to every penny you have.
Establishing good credit is also essential. Pay all of your bills in full and on time. Having a good credit score can be your ticket to lower interest rates on car loans or mortgage, and may even get you plus points when applying for a job.
Be Wise about Debt
Debt is not always a bad thing. If you take a loan so you can earn in the future, it’s a reasonable move. Taking a debt to take up a new course, open a business, or buy a house are instances when borrowing money works to your advantage.
Be careful of interest rates and fees associated with loans and credit cards. Most of these additional costs can easily be avoided by simply paying on time. Automating your payments is a good way to make sure that you won’t miss a due date. Also, prioritize paying back loans that have the highest interest.
Enroll in a 401(k) Plan
Take advantage of you’re a 401(k) plan if it’s offered by your employer. It is a good way to grow your retirement money, tax-deferred. Also, employers usually match what you contribute, and that’s free money that you wouldn’t want to pass up.
A good foundation is vital to achieving any goal. Though you’re still decades away from retirement, it’s important that you develop habits that are essential in building financial security.
On the next installment on this series, we will talk about what thirty-somethings need to do in preparation for retirement.