What You Can Do Now to Set Yourself up Financially Later
Posted On April 02, 2020
For many Americans, financial freedom means the flexibility to save and invest now to give yourself financial flexibility later. When you’re young, things like retirement and your children’s college tuition may not be as top of mind as climbing the career ladder and paying off your student loans. The choices you make now will influence your comfort level later. Here are four things CNBC contributors identified as the most important things to do now to be more financially flexible later.
Increase Your Emergency Savings
Most financial planners recommend an emergency fund of at least three to six months’ worth of living expenses. What you saved to cover your living expenses in your 20s, may not fully cover your living expenses in your 30s. Recalculate your emergency fund each year and add to it as needed.
Invest in Your Retirement
Saving for retirement is one of the best if not the best financial move. If your employer offers a 401(k) match, maximize this contribution. Fidelity Investments, a financial services company, recommends having a retirement fund equal to your starting salary by age 30 and a retirement fund twice your annual salary by age 35. The goal is to work your way up to 15% salary contributions. If you’re not able to commit to a 15% contribution try to raise your contributions each year. If you are self-employed or your company does not offer a 401(k), consider other retirement account options like an IRA.
Buy a Home or Prepare to Buy a Home
A home is the biggest purchase most Americans will make in their lifetime, and it’s also a big investment. When you own a home, every mortgage payment builds your home equity. If you need to access this home equity to pay for another expense you can withdraw equity with a cash-out refinance. Real estate professionals recommend building at least a 20% equity cushion before withdrawing any home equity through a cash-out refinance.
If you do not own a home yet, take the steps needed to prepare for home purchase. Be proactive about improving your credit score, save for a down payment, and talk with a mortgage lender. A lender will be able to help you make a home purchase plan and even find some down payment assistance options that could help you buy a home sooner.
Set Long-Term Financial Goals
What are your long-term goals? Do you want to pay off your student debt by a certain age? Do you want to take an international trip before you have children? Do you want to purchase an investment property or vacation home? Whatever your long-term financial goals are, you can take steps to achieve them now.
Thinking ahead is the key to a bright financial future. If there’s anything we can do to help you take the next steps to success, let us know!