People gain more responsibilities as they grow old. For instance, young adults must pay for rent and daily necessities upon moving out of their parent’s homes and starting a job. Parents must also invest in their children’s education, while senior citizens must prepare for retirement.
While it’s true that money can’t buy happiness, it can at least open doors to experiences that make life bearable and beautiful. As such, the best way to enjoy many milestones in your life is to prepare yourself financially as early as possible.
However, not everyone is determined to secure themselves financially. The longer you delay your financial independence, the harder it’ll be to navigate life and its challenges. Here are some financial planning tips your younger self would appreciate.
- Build savings
Any financial adviser would recommend building your savings as early as possible so you can enjoy life and have something to spare on a rainy day. Your savings don’t have to be big or complicated.
For instance, you can save the remaining income after paying off your monthly living expenses and pending debts. You can use different budgeting techniques like the 70-20-10 or the 60-30-10 rule to properly divide your monthly income. Your small but regular contributions will eventually grow into a large amount over time.
You should also have at least five types of savings:
- Emergency fund
An emergency fund is a reserve meant to cover unplanned expenses such as medical emergencies or sudden unemployment. Experts recommend saving three to six months’ worth of your living expenses to build your emergency fund. You should also not touch this fund unless you desperately need to. - Big purchase fund
Your lifestyle and living conditions change as you grow old. As such, you’ll likely make many big purchases throughout your lifetime. These purchases may include appliances, properties, necessities for family planning, and any other expenditure you can’t pay off with just one paycheck.
A big purchase fund can help you pay for these investments. It also saves you from getting loans with exorbitant interest rates that can harm your finances more than they should. - Vacation fund
Just as you should focus on building your savings, you should also set aside money for vacations and other leisure activities. A vacation fund would be helpful in this regard. Open a savings account and set up automatic deposits into this account, so you won’t have to worry about manually transferring money every paycheck.
- Car repair fund
Owning a vehicle involves additional repairs, maintenance, and insurance expenses. These expenses are incredibly hefty if you buy a second-hand car. They also increase as your car ages. A car repair fund can help you cover these expenses without draining your bank account. - Home or property repair fund
You also need to maintain your house and other properties. For instance, if you rent out residential properties, maintaining them can help you attract long-term renters. Meanwhile, repairing and maintaining your own home can enhance your living conditions in the long run. - Acquire and pay good debt
Not all debts are bad. Debts such as mortgages, student loans, and car loans fall under good debts because they can improve your long-term wealth. For instance, a mortgage allows you to purchase a home or residential property that you can rent out. Its value will also appreciate over time as long as you maintain it.
The key to ensuring these debts stay “good” is paying off your debts as soon as possible. This approach can help avoid penalties and high-interest rates. You should also keep your debts to a minimum to avoid living paycheck to paycheck. Experts recommend keeping your debt-to-income ratio below 35% of your income.
- Plan for the future
When you’re young, you tend to spend more on experiences and things that make you happy. While the “you only live once” mindset isn’t entirely wrong, it sometimes distracts you from securing your future.
Planning for the future helps you prepare for every milestone, such as marriage, parenting, and retirement. Thinking 10 or 20 years ahead sounds daunting, but it’s better to financially prepare for these milestones while you’re young and have the energy to work for them.
To start, list your ultimate personal life and career goals, determine the time frame for each objective, and set your budget. Then, actively work toward these goals as you grow old and progress in your career and other ventures.
You could also consult a financial advisor in Alpharetta to properly manage your savings, investments, and financial obligations. The earlier to plan for the future, the easier it’ll be to enter married and parenting life and retirement.
- Prioritize health
Your health is one of your most important assets in life. Being holistically healthy allows you to work, avoid getting sick, live longer, and enjoy life. As such, you should do whatever it takes to stay physically, mentally, and emotionally healthy.
Caring for your health can be as simple as taking daily 30-minute walks and moderating your food and beverage intake. You can also get health and life insurance for additional peace of mind if you have pressing medical concerns, get into an accident, or suddenly pass away. Getting insured is the best way to protect yourself and your loved ones from unexpected expenses. - Invest in new skills
Upskilling or reskilling is one of the best investments you can make as a professional. It helps you keep up with the ever-changing job market and increase your earning and employability potential. The best part about investing in new skills while young is that you have as much time in the world to do it.
You can invest in new hard and soft skills in many ways. You can sign up for online courses and mastermind programs, take an internship, or work a part-time job. The key is constantly seeking learning and taking mistakes as opportunities for improvement.
Make Your Younger and Future Selves Proud
While there’s no way to go back in time to apply these tips, you can at least start making wise financial decisions today to secure your future self. The sooner you work on your financial goals, the more secure you will be once you hit major milestones in your life.
