7 Tips From Financial Advisors to Help You Never Worry About Savings and Pensions
When you are 20 complete freedom is over — there will probably never be any further such a free period in a person’s life. Studying is finally finished, and there are many paths ahead.
You are young and ready for adventure, so the prospect of making serious investments may not please you very much. But laying the foundation for the future is now, then to enjoy your success.
Here are seven important investment tips from leading US financial advisors.
1. Start investing as early as possible — compound interest will work for you
While you are over twenty, it seems that all life is ahead, and financial discipline will not run away. After all, you are likely to live another 60−70 years, what a rush?
Unfortunately, waiting can be very expensive.
Suppose at age 20 you started saving $300 a month and didn’t stop until you were 60. If all this time you managed to invest at 8% per annum, as a result, more than a million dollars would have accumulated in the account. Now suppose you started doing the same thing at age 30. In this case, by the age of 60, your account will have only 440,445 dollars. It turns out that the first 10 years cost you 550 thousand dollars, even though you have not dug up only 36 thousand dollars.
This is how a compound interest works, which Albert Einstein once called the eighth wonder of the world: the interest that you receive as a result of investments, in turn, accrues interest, and all these amounts add up.
2. Do not stop at just investing
Yes, early investment is the foundation of future wealth, but still, it is not a panacea. As Seattle financial adviser Josh Brain points out, every young person should look at their financial situation from different angles.
For example, suppose you have a loan for an education you need to give back or credit cards with high-interest rates or the habit of spending extra money that you cannot handle.
In this case, investing may not be the best recipe. Brain says:
“It will not save you from debt or bad habits.”
He advises young people to think less about fashion events, and instead pay attention to the culture of spending, debt, savings, and budgeting.
3. Understand that money is a tool
Financial adviser Eric Jansen of AspenCross Wealth Management says a 20-year-old who wants to make a fortune needs to understand that money is just a tool.
Instead of considering money to be the solution to all problems, think of them as a tool that you can use to create your desired lifestyle (unless, of course, you make reasonable decisions about expenses, savings, and investments).
“To live as you want, you need to learn how to put off and invest early. And if today you trade your time for money, in the future you will be able to use the money to free up time for important things for you.”
If you consider money as a tool, then you need to learn how to use it. And Jansen suggests dividing goals into short-term and long-term and allocating investments that will help in achieving them. For short-term investment purposes, for example, buying a home, you need to choose a conservative investment strategy: a bank deposit or a short-term investment fund.
And when it comes to long-term goals like retirement or financial independence, investing should be more aggressive — the time is on your side, and you can wait out all the ups and downs of the stock market.
4. Over the years, start investing more and more
When you’re over 20, you want to do so much that you can’t save a lot — you need to buy a car, housing, you want to go everywhere, and at the same time, you need to create savings.
Therefore, financial adviser Alex Whitehouse of Whitehouse Wealth Management believes that you need to start small and save more with age — you won’t be left without a pension, and there will be enough money for something else. He says:
“Start with one percent of the income and once a year raise the invested amount by another percent.”
Thus, by the age of 30, you will have already put aside 10% of your income, and by the age of 40–20%. And if you get a salary increase every year, you may not even notice that something is changing.
5. Do not follow friends and successful strangers from social networks
Financial adviser Jamie Pomeroy of FinancialGusto.com says:
“Do not try to keep up with all sorts of Kardashians and other celebrities. Instagram, Facebook, Twitter, and Pinterest are full of photos and stories about the impeccable life of your friends and some strangers, but you can’t get hung up on that.”
Unfortunately, sometimes the fear of being left overboard makes us try to maintain a lifestyle that we cannot afford. As a result, we get a bunch of debts and other problems.
According to social networks, it may seem that your friends’ lives are spent in idleness and fun, but ask yourself if this is true and at what cost it goes. Most likely, they did not save anything for the future, and a trip to Thailand, thanks to which such wonderful photos were obtained, was bought on credit.
“It’s better not to be distracted and follow serious advice — this will help to find funds that will become the foundation of your future. If you start investing at a young age, the hour is not far off when you can go to Thailand without any loans.”
6. Invest in yourself
Whatever happens to the stock market or the price of bitcoin, a person’s life is under his control. Colorado financial adviser Matthew Jackson of Solid Wealth Advisors says:
“The most important thing we control ourselves is our investment in ourselves.”
Whenever possible, Jackson offers to invest in his own personal, professional, and financial growth, because these are the best investments of all possible.
“Read books and go to conferences that promote your professional growth, and in everyday life follow the wisest recommendations available. Investing in yourself will bring you more money and new opportunities than any other.”
Investing in yourself cannot be a losing one. While you are young, it’s not too late to return to the university, get an important certificate, or change your profession if you always wanted to do something else.
7. Automate investments, and learn how to save money yourself
Whatever investment option you choose, it is better to make it automatic. Coretegic Capital’s financial advisor Anthony Reynolds says:
“Setting up an automatic deduction of part of your income to a savings account will help you not to make the painful choice between instant and delayed pleasure every time.”
As soon as your investments become automatic, life will become much easier. It is also a movement along the path to future welfare.
So if you can get used to saving and investing at a relatively young age, you will never have to worry about savings and pensions again.