Financial Planning for Young Professionals

Shallon Weis |

Extra money in your 20s? Is that even a thing?

We get it. Your 20s are often seen as a true coming of age when financial responsibility opens up the possibility of turning your dreams into reality. You’re settling into life after university, paying off debts, and starting to really define who you are as a person. But with bills, rent, keeping up social appearances, and other pressures, financial planning is often pushed to the side.

Instead, you may need to take a different approach to your financial goals than previous generations. But what can you do that allows you to plan for the future, achieve shorter-term goals and pay off debt?

Just Start...But Keep it Small

Excess cash that’s sitting around is begging to be spent on impulse purchases. Instead, investments, even small ones, have the potential to grow over time.

Like an automatic withdrawal from your account for services like cell phones and streaming, you can use auto withdrawals from your check-in for saving monthly that deposit into a Roth IRA (which allows you to take advantage of tax-free growth on your month). As with your streaming services, you almost forget that they are reoccurring, but allocating that to longer-lasting financial investments is what separates smart spending from lost spending. You're building savings with the power of Compound Interest on its side.

What is Compounding Interest?

Dig deeper here in this quick Compound Interest video that breaks down this smart strategy.

Commit to setting aside as little as $50/month from your paycheck to make this deposit into a financial planning account (401k, Roth IRA or other mutual fund accounts). As you earn more income commit to increasing that automatic deposit as your income supports. Assess where you can minimize expenses to free up investment money that may benefit you in the long run. Set a goal based on your income and goals and go from there.

Note: Sometimes to start these accounts you do need to deposit a set amount to get started.A financial planner can help you get one set up. 

Visit with a Financial Planner

Even if you think you have too little to begin, these folks are there to advise you on the best ways to reach your goals. And we all had to start small to grow big, so lean on trusted financial planner to point you in the right direction.

Being able to start saving for retirement in your 20s can be beneficial, but it doesn’t have to be the be-all-end-all. Talk with your financial planner ab out how to set money aside for your shorter-term goals, like:

  • Paying off student loans
  • Saving for a down payment
  • Starting a family
  • Traveling

Once you’ve identified your goals, you can build a plan to save for the long-term while still giving yourself the freedom to enjoy life in the moment.

And as for retirement planning, see if your company has a sponsored 401(k) program or another retirement plan, and try to contribute an amount that will allow you to take advantage of any potential employer match.

Consider Diversifying Your Portfolio

It’s generally believed that attaching yourself to individual stocks opens you up for risk. Spreading your investments across numerous stocks may lessen the impact market volatility can have on your early investments.

Keep in mind that diversification does not ensure profits or protect against losses in declining markets.

Continue to Educate Yourself

The world of investing can be intimidating. But by educating yourself, both on your own and by consulting with a financial professional, you can build your understanding of investment jargon and keep yourself informed.

You're not too small fo Bradford to help! We get that concern a lot from clients who feel they don't have enough savings to warrant talking with a financial advisor. Not true. Our goal is to help you reach your goals and that starts small and it starts with a plan. 

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This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2024 Advisor Websites.