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, but saving is very crucial. 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 not having financial security can become a serious source of stress – something 20-somethings have enough of already.
So how can you achieve long-term financial security without sacrificing your short-term goals? Read on for 6 tips on how to do just that.
Your skills, knowledge and experience are the biggest asset 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 is the most important factor in achieving financial independence and security. 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 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.
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. Become a planner. Set goals and develop an action plan to reach them. 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.
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 they need. Rather than using excess income to buy new toys or live a more luxurious lifestyle, this excess could be put 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 paying down debt, making investments, saving for a home, or achieving any other financial goals you may have. Where many people get into trouble is that they feel entitled to a standard of living that exceeds what they can afford.
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. The more knowledgeable and experienced you are in financial matters, the fewer mistakes you will make.
Taking calculated risks – moving to a new city with more job opportunities, going back to school for additional training or taking a new job at a different company for less pay but more upside potential – 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.
Younger people can afford to take risks, and the same opportunities might not be available later in life. Taking calculated risks when you can afford to do so is necessary to get ahead financially. Playing it safe might be the bigger mistake in the long run.
As mentioned before with the Joneses, you should never borrow to finance a lifestyle you cannot afford. 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.
Achieving financial independence is a goal most people strive for. It is not necessarily easy but it is achievable if you understand your priorities, set achievable goals and take the proper steps toward reaching them.
Culled from www.investopedia.com