Financial Preparation in Your Twenties
Whether you are in school, starting a job, or well into a career, the future can be planned for now. The earlier financial planning begins, the more effective it will be in the future. Life is uncertain, obstacles cannot always be foreseen, but there are few finances that can be planned for.
Most people plan on becoming parents at some point in their lives. The average cost of raising a child in the US (as of 2013) is estimated to be $304,480 when factoring in inflation. Birth alone can range from $2,000-$5,000 without complications. There are a few steps that can be taken to financially prepare for this step in life.
Understand Insurance - Know what and how much is covered on your plan ahead of time. This will help you more accurately budget for the birth and postpartum hospital visits.
Set up an After-Birth Budget - Before the baby arrives, look over finances. Understand and acknowledge where cutbacks need to happen in order to afford the necessities of raising a child.
Start Saving Early - Set up a fund early on to save money. You can start saving now or later, but at least begin a fund once you know you are expecting.
Consider Debt - Consider what type of debt you have now and whether it could be paid off before kids are in the picture. Once you are expecting, continue paying off debts, but don’t try to quickly pay them off completely. Make sure you have money for emergencies.
Owning property is a highly sought after goal. Homeownership is financially smart in the long run if you plan to stay in an area long term. Whether you want to buy a house, townhome, or condo, you are going to need the money for a down payment as well as monthly mortgage payments. A higher down payment allows you to pay off your home sooner and/or pay less each month.
Determine Affordability - Before beginning to look at homes, first consider how much you can spend. Talk to lenders to learn how much you can borrow and what current mortgage rates are.
Improve Credit Score - Better credit scores mean better interests rates. If a credit score is low enough, you may not qualify for a home loan at all. Check your credit score, and see what you can do to higher it.
Save for a Down Payment - Set a little money aside from each paycheck early on. Consider putting money in a high-yield savings or short-term CDs months before a purchase.
Consider the Pros and Cons - Carefully consider the pros and cons of houses and condos. Do research to learn which is the best option now, and in the long run.
Retirement may seem far into the future, but it is never too early to start planning for it. In fact, making preparations now can help you to retire early and/or retire wealthy. Simple steps now can start off a good retirement plan.
Consider a 401k or Roth IRA - If your company offers a 401k, sign up for it. Many employers will match up to 3% of your salary. If a 401k is not an option, then consider a Roth IRA. A Roth is funded with money that has already been taxed as part of your paycheck.
Invest - Educate yourself on investments; look into investing money in stocks and bonds. Investing in your 20’s is wise because it gives the money time to sit and grow. Since retirement is a ways off, you can be more aggressive with your investments, particularly in stocks.
Pay Off and Avoid Debt- Any time you are saving, debt is the enemy. Try to pay off student, car, or other personal loans as quickly as possible. As you move forward in life, try to avoid unnecessary debt.
By Learn Accounting Free | 2016-06-20 19:55:33 | Uncategorized | 0 Comments
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