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Savings Advice I’d Give To My 20-Something-Year-Old-Self

Experiencing financial freedom after graduating from college is liberating but what you do with that first paycheck will pave the way for your financial future. Believe it or not, creating smart savings habits starts while you’re young. Sure, it feels nice to wine and dine every night of the week but how do you think your bank account will look in 10, 15, or 20 years from now? I want to share with you a few things I’ve learned along the way, some of which I’ve had to learn the hard way.

Live Modestly. You can’t always control whether you live on the east coast, west coast, or somewhere in the middle but you can control the type of housing and the number of people you live with. It’s tempting to live in a beautiful studio apartment downtown but choosing a townhome a few blocks away with a few roommates could save you several hundred dollars or more a month.

Credit Cards. Yes, credit cards do help build credit. And yes, building credit is important when it comes to making major purchases but maintaining a good credit score won’t be possible if you spend more than you earn. If you don’t have the financial means to pay the entire balance off at the end of every month, then maybe it’s wise to reconsider your purchases. Perhaps booking that flight to Jamaica for spring break with your friends might have to wait until next year.

Establishing Automatic Transfers. Scheduling an automatic transfer from your checking to savings account on pay-day is one of the best ways of “paying yourself first” by sticking to a budget and building an emergency fund. How much should you have in your emergency savings account? Although it’s different for everyone, I’d suggest setting aside a few months’ worth of income to give you the financial (and psychological) cushion to be prepared for the unexpected (i.e., job loss, illness, etc.). And believe me, things happen even to the best of planners.

Retirement Funding. It is never too early to start. If your employer offers a match for a 401(k) or alternative retirement plan, it’s important to take advantage of that opportunity and, at a minimum, you should be contributing to meet your employer’s match. If your employer doesn’t offer retirement benefits or you want to save additional money in an alternative retirement account, you can always invest in a tax-deferred (Traditional IRA) or an after-tax (Roth IRA) retirement plan through one of our Jemma Financial Advisors.

Start Small. If you can’t max out your retirement savings plan or grow your emergency savings account overnight, that’s okay. It’s acceptable to start small but remember to increase those contributions over time as long as your reasoning for currently saving less isn’t for spending more today on luxury items. Establishing disciplined savings habits will ensure you are saving first and spending second.
The most important component to consider when saving is starting with a plan and sticking to it. Our downloadable monthly budget spreadsheet breaks down your monthly spending and makes saving easier. It might be uncomfortable at first because you will sacrifice luxury items such as dining out or purchasing the newest model car for one that is a few years older. Whatever your sacrifices are today, your future self will thank you.

Do you have questions on developing a savings or investment strategy regardless of your age? Contact Jemma and let’s start working towards a clearer path to achieving a more secure financial future.

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