How To Achieve Financial Security Before The Age Of Thirty
It can be hard being a young person in today’s economy. There aren’t all that many high-quality jobs for those new to the job market. And what high-quality jobs are out there often demand so much time and energy life becomes a chore.
Many young people right now are suffering from financial worries. The biggest issue by far is student debt. Millions of young people are saddled with thousands of dollars of debt, money they owe to pay for degrees that didn’t get them the jobs they wanted.
Financial insecurity can take it’s toll on your health and make you feel stressed out. It’s not a pleasant experience never knowing whether you’re going to be able to afford the next payment on the rent.
It may sometimes seem like nothing can be done. But even in this tough environment, there are things that young people can do to improve their financial security. The following is an in-depth look at what you can do to improve your security in the future.
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Watch Out For Freebies
There aren’t all that many things in the world that are free. In fact, economists insist that there is no such thing as a free lunch. But having said that, there are things that you can take advantage of that cost you nothing personally.
One thing that you can do to boost your income in the long term is taken out a company pension plan. A pension plan is, essentially, free money your employer puts into a pension pot for when you retire. It may sound surprising to suggest that this can help you achieve financial security before you’re 30. But starting a retirement plan now will pay dividends in the future, and it’s not an extra expense that you’ll have to incur further down the road.
And when it comes to using a company pension plan there’s no point holding back. If you can afford it, make the maximum contribution possible because employers will match it. It’s short-term pain today for big rewards in the future.
You can also keep an eye out for ways to take advantage of existing tax laws. Rather than taking all your income in the form of cash, perhaps you could take some of it in the form of stocks and shares. Stocks and shares are usually liable to pay less tax because capital gains taxes are often lower.
Invest For Tomorrow
When times are tough, you have to make tough decisions. And one of those decisions has to be to cut back on your current level of spending. The problem with spending today is that you are reducing the amount of money you’ll have available tomorrow.
What’s worse, many young people today are borrowing, just so that they can spend more. This inevitably leads to a cycle of consumption and debt, which leaves them much poorer overall. The interest rates on loans alone can add up to thousands of pounds each year.
The best advice out there is only to borrow money if you plan to invest it. And don’t think that spending money on a gap year where you travel the world is an “investment.” The word investment has a very strict definition. It’s only an investment if you expect it will make you more money in the future.
Spending money on making money will get you to your financial goals much faster than going into debt just to finance a lifestyle. You could buy equities, bullion and real estate if you expect the prices to rise in the future. You could even borrow to start a business if you’ve had a excellent idea.
Start Planning Now
If you’re just out of school, retirement probably seems like a long way off. It’s hardly the time when you should be thinking about taking your pension right? Wrong.
If you start saving for retirement early, you’ll build up a large pension pot because of the effect of compound interest. You’ll be amazed at how large, small contributions today can grow over the course of decades. And remember, it’s almost inevitable that in the future your wages will rise substantially. So even if you can’t make large contributions today, you will always be able to put more money in the pot at a later date.
You might also want to consider taking out a life insurance policy from a company like LifeNet Insurance Solutions. Life insurance gives you peace of mind and protects your family if something should happen to you.
Most young people don’t think that life insurance applies to them. After all, they aren’t going to die anytime soon. But, of course, thousands of young people die every year from vehicle accidents. And this can leave their families behind in dire financial straits.
Remember, financial security doesn’t just mean having more money in the bank. It also means that you have a plan for all contingencies.
Keep Your Lifestyle Simple
You’re a graduate. And as a result, for the first time in your life, you’re earning some significant money. In fact, just a few years after leaving university, your pay has gone up twice. You’re more experienced and have moved up the career ladder.
This means that it’s decision time. Do you spend money on new toys and gadgets, funding an ever more extravagant lifestyle? Or do you put the extra income towards savings an investment and continue with your regular lifestyle? If you’ve been paying any attention to this article so far, you’ll be able to guess which decision you should make.
If you keep your lifestyle simple, you’ll be able to use that extra cash for a variety of purposes. You could save up for a deposit on a house, for instance. Or you could make additional investments that will pay off in the future. Don’t feel as if you have to attain some ideal standard of living. You don’t. Just because your friends have bought expensive cars and go on holidays every couple of months doesn’t mean that you have to as well.
Keeping things simple also gives you a sense of financial security you couldn’t achieve otherwise. Not having large outstanding car loans or credit card debts means that your life is a lot more relaxing. And, most importantly, you can get on with enjoying yourself.
Invest In Yourself
It may be a cliche, but you are your biggest asset. The amount of income that you can generate dwarfs anything that your investment portfolio could achieve. Just think for a moment about the total value of your future income. Adding it all up and you will likely arrive at a figure of well over £1 million.
And the good news? You can do all sorts of things to improve your economic value today. In fact, your early twenties are the ideal time to do this. You don’t have kids, and you probably don’t have a mortgage. In other words, you have time to dedicate to building up your personal human capital.
Starting early means that you’ll have many more opportunities for company advancement in the future. By doing the right training and learning the right skills, you can quite easily end up earning double what you earn today by the time you hit thirty.
Don’t Forget The Fun Factor
Right now it probably seems that the most important factor in life is making money. After all, that’s what you’re sorely lacking.
But the most successful people in life stress the point that work should be balanced with other activities. Don’t forget that you’re only young once.
Successful living means having enjoyable work. But it also means having enough time to dedicate yourself to the things that really matter to you. That could mean spending more time with your family or pursuing hobbies that make life worthwhile.
Become Literate In Financial Matters
Not all investments are the same. Some will have a higher likelihood of paying off in the future than others. But safer investments come with a lower rate of return.
The type of investments that you make is ultimately a choice for you. It’s all based on the level of risk that you personally are willing to accept. If you’re going for financial security by the time you’re thirty, it might be best to play it safe. If you want to take a risk and go for higher returns, then you’ll choose riskier assets.
But aside from just deciding which assets you want to invest in, you can also educate yourself about the market and the economy as a whole. The more information you gather, the more you will be able to understand long-term trends. And the more you understand long term trends, the better you’ll be able to predict where the market is headed.
Knowing where a certain market is headed will put you in a great position to make extra cash in the future.
The bottom line is that to become financially secure in the future, you have to put in the time and effort today. It would be misleading to say that this process is pain-free. But it’s certainly a lot less painful and stressful than the alternative.