Here are five tips for young professionals who are looking to successfully build their financial foundations. The younger you are when you start saving and thinking about the future, the better off you will be.
- Start with the end in mind. Where do you want to be financially in five, 20, or 40 years? Don’t only focus on your immediate needs at the expense of your long-term financial future. Set goals, envision your financial future, and decide how you are going to make it happen.
- Live within your means. When you’re just starting your work life and earning a modest income, don’t try to keep up with peers who may spend like there is no tomorrow. Live and spend within your means by keeping your long-term goals in mind. Learn the difference between wants and needs. Prioritize spending on your needs first, savings second (which includes participating in an employer-sponsored retirement plan), and wants if there is money left. Find friends whose financial values align with yours, as the people you surround yourself with will greatly impact your spending habits.
- Create a budget and monitor it regularly. You can easily set and track a budget by using a budgeting website, app, or financial software. Most clients who reach financial independence ahead of traditional retirement are disciplined at monitoring their spending habits because they are intentional with where they spend their hard-earned funds.
- Pay off your debts. Interest never sleeps or takes a day off. It can be challenging to focus on long-term financial freedom when all your extra income is applied to debt. Focus on paying off high interest rates first, and once high interest debt is gone, apply the extra money to save for future goals. If you don’t have the money, don’t spend it!
- Start now. Implementing healthy saving habits is easier at a young age. Also, compound interest and reinvesting of dividends can help provide more growth in your investment accounts over long periods of time. Time is on your side, so start early!
If you have these five basic steps down, and you’re interested in taking your financial planning to the next level by looking into additional strategies, developing a detailed analysis and projection to optimize your financial life, please reach out to our advisors at CCMI; we will be happy to see how we can help.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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