Many of twentysomethings find it hard to handle their finances, especially those who recently graduated from college. Oakmere Advisors finds it important that each individual should learn how to properly budget their money in order to avoid any problems when paying their loans and credit card bills.
After conducting thorough reviews about the matter, Oakmere Advisors found out that most of the young individuals today views money as a major source of stress. But the good thing is that twentysomethings are more responsible with their money than the Generation X nowadays.
There’s a word that could sum up your 20s: INDEPENDENCE. It’s a stage in your life where you have to further develop yourself and your capabilities. It is where you should learn how to make money because you must practice paying your own bills and manage cash flows. However, you might end up having terrible problems if you don’t have a proper financial education.
If you are one of those individuals that are on the verge of massive stress because of their finances, you don’t have to worry anymore because Oakmere Advisors will certainly help you to handle your finances easily and effortlessly with the following helpful tips.
The very first tip that Oakmere Advisors wants you to consider is to use your 401(k) if you have some. Young people don’t have sensible goals when it comes to their retirement these days. Most of them think that they will only spend less than $30,000 a year in their old age. Remember that pensions are getting rarer and Social Security payments are getting smaller, so you should give more considerations about your retirement starting today. Oakmere Advisors suggests that you should save at least 4 percent of your pretax income or 18 percent if you make more money in order to get about 85 percent of your working income when you retire. The specific amount that you should save depends on your income and the lifestyle that you’re used to now.
If your employer offers a 401(k) match program, you should contribute at least enough to meet the match threshold. If you don’t have a 401(k), you could open a Roth IRA or a myRA account. Do your best to save as much as you can. The contributions for both accounts are usually automatically deducted from your paycheck, so it’s easy to set it and forget it.
Oakmere Advisors second important tip is that you should save even more! Most young individuals are too busy thinking about today that they tend to forget about tomorrow, and saving money becomes an afterthought. You need to have an emergency savings of at least 3-6 months of your expenses. Put it in either a checking or a savings account so that you could easily withdraw it if you need to. You should also start saving for your retirement because you could end up $500,000 richer by the time you retire.
Third tip is to monitor your spending. Reviews made by Oakmere Advisors say that mobile apps are actually helpful when it comes to your finances because they could aid you in assessing your spending and start saving. They could also help you put your finances in writing and even send you alerts if your purchases are bigger than usual.
“Take into account the costs of grad school”, Oakmere Advisors says in its fourth tip. It is important to track your budget before enrolling. Run the numbers, and see if a two-year program could be just as good as a four-year one, or if you should save money for a couple of years before returning to school.
Are you used to rent a new car? Buy a used car instead, according to the Oakmere Advisors fifth tip. It makes more sense to buy a cheaper used car because your monthly payment is just the same as leasing a car. If you buy a car, you could sell it to acquire a little money if you’re planning to move to other place, but if you just lease it, you’ve basically thrown the money away. Buy a used version of your dream ride, even if it’s only a few years old because you’ll save a lot of money.
Start developing credit, this sixth tip might be a big NO to others, but Oakmere Advisors also sees it as a good thing. You should get one now to boost your credit history. If you suddenly want a mortgage or a car loan, credit cards might come handy because both require a good credit score. If you don’t qualify for a credit card, try a secured credit card that could help you boost credit if you put down a security deposit first. Just make sure to set up an automatic payment with your credit card to pay off the balance in full each month.
Seventh tip is to invest in the stock market. Keep your money in a savings or checking account if you need it over the next two years, but if you won’t need it for the next two to five years, invest in bonds. And if you don’t need it for more than five years, invest in stocks, regardless how small the amount. But don’t jump into the stock market unless you’re already putting enough money into your 401(k).
And Oakmere Advisors last tip goes like this: make the most of your taxes! We all know that taxes are really, really complicated, but if you get a handle on your deductions now, it could be easier for later. Sign up for a Health Savings Account (HSA) once your employer offers it. Your salary could be considered slightly lower income tax time, which could save you money because this account lets you contribute pre-tax dollars. Then, the money increases in your account (also tax free), and you could withdraw that money tax-free. A Flexible Spending Account (FSA) does similar things, but with restrictions, such as spending limits and no rollover from year to year. You are also eligible for tax deductions if you’re in school, paying off student loans, own a home, or fall below a certain income threshold. The IRS has a comprehensive list of tax deductions on its website, and you should take the time to look it over before crunch time in April.