When most young people think about financial planning, they often think that it's something reserved for people facing retirement or those with a lot of money already. But engaging in some financial planning is one of the best investments a person in their 20s can make. Not convinced? Here are five ways it will benefit you for a lifetime.
1. You Avoid Financial Mistakes
A young adult is still learning how the world works and what kind of life they want to live. But that learning process can at times be costly. Many young earners rack up credit card debt or make purchases that cause stress for years, or find themselves taking too much risk in investments. By approaching financial planning proactively and with the help of others, you avoid these potentially painful errors.
2. You Develop Good Habits
Replace missteps with good financial habits. Having a financial strategy and planning for goals allows you to learn to save early, to forgo expenses for more important reasons, and to focus your efforts in the right places for success. The longer you wait to learn how to make good strategies and have good financial habits, the more work it will be to keep to them.
3. You Start Saving Early
Saving money early makes a huge difference in how easy or how difficult it will be to reach your goals. If you begin saving 10% in your 20s, for example, you will end up with a similar nest egg as a person who puts away 40% beginning in their 40s. The difference is the power of letting your money work for you through compound interest and returns on investment.
4. You Learn About Free Money
Everyone loves free money, right? There may be sources of free money in your life that you don't know how to tap. This includes things like employer matches to retirement contributions, education assistance, stock dividends, compound interest, and interest rate shopping. A financial planner will help you take full advantage of all opportunities to access the right, cheap money.
5. You're Prepared for Responsibility
Learning to manage your own money prepares you for other responsibilities and opportunities about to come your way. You prove you are ready to take on more responsibility in your career, to start a family of your own, to care for yourself without parents, or to start your own business. Financial planning lessons you learn on your own will make all these more possible.
Which of these benefits could you use most? Whether you want to avoid expensive mistakes or make use of the power of time you've been given, financial planning is an important gift you can give yourself at any age.
For more information, reach out to a company like Northwestern Mutual Office of Joseph Morris.
Share19 October 2020
My name is Alison, and I recently found out that I should have been saving for retirement since I first began working. I have now discovered what it takes to have a successful retirement plan, and I felt secure in my ability to care for myself once I am done working. I may even be able to retire early! I'd like to help you get your retirement plans in order and make the most out of the time you will have when you are no longer working. Let me help you understand what you need in a retirement plan and how you can get started.