If you are like a lot of people, balancing the financial needs of today with the financial needs of tomorrow is a constant challenge. It can be really hard to protect our future self from our current self. Like most things, the earlier we develop good habits around managing money for those future needs, the better. I have asked many retirees the question — “If you could go back thirty years and give yourself advice about retirement, what would you say?” To no surprise, one of the most popular answers is, “I wish I would have started saving earlier.” To avoid giving the same response when you retire, here are five habits that everyone can develop before turning 25.
1. Keep track of everything in one place. Call it a budget. Call it a plan. Use Quicken, sign up for Mint.com, create a spreadsheet or keep it in a special notebook. Whatever it is, track your income, assets and debts in one place. Even if you don’t like what it is telling you, ignorance is not bliss in this situation. Your life clock keeps ticking, making this harder the longer you put it off.
2. Take advantage of any/all savings plans offered at work. If your employer offers a 401(k), 403(b), stock purchase plan or other savings plan, take advantage of it. Many plans offer an employer match (a.k.a. — free money). Some enable you to purchase company stock at a discount.
3. Open an IRA. These accounts, whether traditional or Roth, offer a positive tax benefit. If you put money in an IRA, you create the opportunity for time and compounding to do their thing.
Source: Huffington Post | Jerry Patterson, Senior Vice President, Retirement and Investor Services, Principal Financial Group