When it comes to your financial future, there is no time like the present.
The smart steps you take today will help you build the financial foundation of a lifetime. The key word here is today. A common misconception is that saving and investing can be put off until you “have more money.” Actually, it is much better to start sooner with smaller amounts than to wait until later in life and contribute larger amounts to your savings and investing accounts. With a long time horizon, small steps can make a big difference in wealth creation.
Furthermore, as you progress through your career your financial situation tends to get more complex. As we get older, we tend to acquire more financial obligations. The best time to start preparing for your own financial future is right now.
Begin by outlining your major financial priorities.
- Don’t have an emergency fund yet? Make it your first goal to build one.
- Are you free of high-interest debt, like credit card debt? If not, tackle those debts immediately – but make sure you keep building your savings, as well. (Why? If you divert every spare cent to your credit card bills but have no cushion to fall back on, then you’re stuck in a bad position if an unexpected emergency occurs. You need that buffer so that you can deal with a car breakdown or medical emergency without having to rely on credit cards again to get through.)
- Once you have an emergency fund saved and have no high-interest debt, it’s time to start investing.
Sound like a tall order? Not to worry. You’ve already tackled the most important step: making the decision to start today.
The next step is to make a plan. Start by breaking down your take-home pay according to the 50-30-20 plan: 50% necessities, 30% lifestyle expenses, and (at least) 20% to build your financial foundation. Divide that amount between paying down your debt, if you have any, and saving for the future.