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Financial Decisions You Must Make in your 20’s and 30’s

"I wish someone would have told me that." The following post was written by a good friend and fellow coach, Brian Howard. He has some powerful tips and advice for all young leaders. At the very least it is important for young leaders to begin asking questions about some of these items. 

Your 20’s and 30’s are the most important financial years of your life. The financial decisions you make over these years will determine what your life will look like later. If you are in your 20’s or 30’s, here are four financial actions you should be doing right now.

1. Start Saving 15 Percent ASAP

I Know! Saving in your 20’s and 30’s is hard. How can you save when you barely have enough money to pay all of your expenses? Saving doesn’t get easier later. You will never feel like you have extra money to save. You just have to buckle down and find a way to get it done now. When you save, you are writing your future self a paycheck that will be ten times the amount that you save nowSaving earlier in your adult life is exponentially better than getting started later.

Check out this scenario:

  • If you save $2000 per year from starting when you are 25 and earn 8% interest, you will have $560,000 at age 65.
  • If you set aside this same amount starting when you are 35 and earn 8% interest, you will have $245,000 at age 65. – less than half of what you would have if you had started at 25.

When it comes to saving, there is simply no better friend to you than time.

Start saving now and aim to save 15% of your income. Reorganize your financial life to make this happen. Failing to save in your 20’s, and 30’s will put you in a bad financial situation later. Don’t be the 60-year-old who is scrambling to try to figure out how you will survive financially for the rest of your life.

Start as soon as possible and save 15% of your income.

2. Set Up A Retirement Savings Plan

Now that you have reorganized your life to save, you need a place to put your savings. Here are a couple options:

Option 1  – For Anyone: Set up a 403B or IRA with VanguardVanguard is the largest and one of the most successful mutual fund companies in the world.  Just getting started and not sure where to invest? You will eventually want to learn more about asset allocation. But for now, choose a Target Retirement Date Fund based on your age or the Vanguard Total Stock Market Index Fund.

Option 2 – For More Advanced Investors: Consider a Platform like Future Advisor, which uses Modern Portfolio Theory. (I use Future Advisor and manage my portfolio rather than paying them .5% for premium service)

3. Set up a Retirement Matching Plan

Many employers match an employee’s retirement contributions up to a particular percentage. If you already work in an organization that does this, take advantage of the opportunity and make sure to contribute at least as much as your employer matches. 

4. Get a Good Tax Professional

I have said this before and will it again. Stop using Turbo Tax, or your uncle, or some guy in your church as your tax guy. The day I stopped doing my own taxes was the day that I began saving a ton of money. A tax professional that specializes in tax issues will save you a lot of money by maximizing benefits that are available to you. Keep in mind, you will have to spend money in order to get this done. I use Your Money Matters and pay them a lot more than the local H&R block, but the money spent is well worth it. If you would like Your Money Matters contact info, email me and I will help get you started. 

Know someone who might benefit from this? 

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