You’ve taken a step in the right direction when it comes to your finances, but what about your kids? Or are you a first time saver yourself? Many young adults haven’t given much thought to preparing for their retired life. Lots of Gen Xers and Millennials are saddled with student loan debt and may worry more about paying back their debt than starting a retirement fund. In reality, beginning a path toward retirement is an important step in becoming financially free. It’s never too early to begin saving for retirement, here are some tips for getting the first-time saver on the right track.
Start with a plan
Meeting with a financial planner at Retirement Income Strategies is an excellent place to start saving for your retirement. Even if you don’t have a large sum to invest, a meeting is important. A financial planner can take an unbiased look at your finances and help you stretch your money as far as it will go, while helping you build your net worth.
Take advantage of your company’s programs
If your company offers a 401K or similar program make sure you contribute to it–especially if your employer matches any part of your contribution. Putting money in a 401k allows you to contribute to your retirement without paying taxes up front. Any contributions you make come off your salary before taxes, which gives you as the investor a huge advantage. If the company you work for is willing to match a percentage of your contribution, make sure you take advantage of the savings you’re offered.
Use multiple investments
Spread your money between multiple investments. In addition to using your company’s 401k, consider investing in a traditional or Roth IRA as well. It’s a good idea to invest your wealth in a few different types of funds, and the minimum investments on IRAs are relatively low and perfect for a first time investor. Having multiple investment accounts allows you to accrue multiple levels of interest as well as increase your overall savings.
Stick to your plan
After you meet with our planner and start on a path toward savings, stick with the plan you made. It’s important to include the money being saved in your overall budget to avoid over-extending yourself. Once your realistic savings budget is calculated, keep to it! Being consistent with the amount you save will help create good saving habits that will set you up well for your journey toward retirement.
Create an emergency fund
Save the total of at least 3 month’s salary in case of an emergency. If something in your life doesn’t go according to plan, an emergency fund can create a financial buffer. Having an emergency fund can prevent you from withdrawing money from any investment accounts. Withdrawing money early from certain types of accounts can result in penalty charges, but more importantly, it uses the money you’ve worked so hard to save.
A little goes a long way
And remember, even if it doesn’t seem like you have much extra to save, a small amount of money can accrue to a much larger sum more quickly than you can imagine! Even if you only are able to save $20 a month, you are one step closer toward a happy and stress-free retirement.