Miranda Marquit, Ticker Tape Contributor
The habits you develop with your money today can lay a foundation for your future wealth and financial success. So, you can set yourself up for future financial success by considering the following money moves:
1. Create a Budget
A good first move is to create a budget so you can direct your resources in a way that makes sense for you. Start by reviewing your past spending and income so you get an idea of how money moves in your personal financial situation.
Prioritize your expenses, starting with needs like housing, food, and transportation. Look at other financial goals you have, including paying down debt and saving for a down payment on a home. All these items should be considered, along with when and how much you expect to get paid.
By having a plan for conscientious spending, you can get more from your money in the long run.
2. Save for Retirement
The perfect time to start saving for retirement—even if you have outstanding debt–is now. If your employer offers a matching contribution to your tax-advantaged account—usually a 401(k)—take full advantage. That’s free money for you. Even if your company doesn’t offer a match, it’s still a good idea to save for retirement as early as possible. If you start setting money aside now, it has time to potentially grow using compounding returns. The longer your money is in a retirement account, the more likely you are to reach your wealth goals later.
Consider having your retirement contribution taken directly from each paycheck. Make it automatic and you won’t have to think about it going forward. Then when you tweak your budget, you can base that budget on your pay after your retirement contribution is already taken.
3. Build an Emergency Fund
With an emergency fund you’re more likely to avoid debt when something unexpected, like a car repair, comes up. Even if you only have a few bucks a week to set aside for emergencies, that can potentially help you in the long run. When you have an emergency fund, you can also gain peace of mind knowing you can cover unexpected costs that crop up.
Consider using a high-yield savings account or some other account for your emergency fund. Think about your needs and how you might need to access the money, then set up an account that’s likely to fit your style. The key here is to start with as much as you can and get in the habit of setting aside money for a rainy day. As your finances improve, you can increase how much you set aside for emergencies.
4. Pay off Student Loans
Kore than 40 million Americans have outstanding student loan debt. And, now is a good time to start paying off your student debt. First, check with your employer to find out if they have a student loan repayment program. Some companies will match your student loan payments, and others will simply put money toward student loan repayment for its employees. Find out if such a program exists in your company.
Next, figure out if you might need to get on an income-driven repayment plan if you can’t afford your payments. Student loan consolidation might also help you reduce your monthly payments. However, realize that being on income-driven repayment or using consolidation can cost you more in the long run because it lengthens the amount of time you have the debt.
Finally, don’t forget to look into student loan forgiveness. Depending on your job and your employer, you might be eligible for state and federal forgiveness programs. Find out what’s available to you and make a plan to meet the requirements so you can potentially get a break later.
If you aren’t eligible for forgiveness but can afford to put more toward your student loans, consider paying extra each month. You can also consider using a private refinance to reduce your interest rate and pay off your debt faster. Carefully think about your choices and what’s likely to work best for you.
5. Plan for Life and Financial Goals
Plan for tomorrow by setting financial goals today.
Don’t forget to set aside money for other goals. Get used to thinking ahead and creating a plan to save for items that are important to you. Whether it’s a down payment on a home, having a baby, going on vacation, or buying a car, think about how you want to direct your financial resources in the future.
You can save for multiple goals at once. Prioritize them by time frame and amount and look for ways to set aside money for them each pay period.
In the end, one of the best things you can do for your financial future is get used to prioritizing your goals and directing your resources toward the things that matter most. It’s essential to put that money to work on your behalf and develop habits that will lead to financial stability in the long run.
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